According to the data published by the National Bureau of Statistics (NBS), the total value of Company Income Tax (CIT) collected in Q1 2021 was N392.8bn, a growth of 32.8% when compared with N295.7bn collected in Q4 2020.
Yearly, CIT revenue also improved by 32.8% when compared with N295.7bn generated in Q1 2020. The increase in CIT revenue was largely driven by foreign CIT payment (up 44.8% y/y to N184.6bn), trailed by local CIT payment (up 14.8% y/y to N152.3bn) and Other payments (up 56.9% y/y to N55.9bn).
We believe the growth in foreign CIT payment may be partly due to the impact of the devaluation on the Naira equivalent of the payment.
Across sectors, we acknowledge that growth in collections was not broad-based as some sectors declined both y/y and q/q.
Nevertheless, Breweries, Bottling and Beverages (+329.5% y/y), State Ministries & Parastatals (+46.7% y/y) and Oil Producing (+62.7% y/y) contributed most to the yearly growth while Textile and Garment Industry (-75.5% y/y), Automobiles and Assemblies (-82.5% y/y) and Pioneering (-78.6% y/y) were the biggest laggards.
We also highlight that collections via electronic channels (E-Transact, E-Tax pay & Remitta) grew by 56.9% y/y. This points to the fact that efforts to digitalize the tax collection process is gaining traction.
Both CIT (+32.8% y/y) and VAT collections (+52.9% y/y) totalled N889.2bn in the first quarter of 2021 compared with a total of N620.3bn in VAT and CIT payments for Q1 2020 (up 43% y/y). This signals significantly higher tax revenues for 2021 which bodes well for the government’s fiscal position.
Over time, we have observed higher CIT and VAT figures in the second and third quarter of the year, therefore holding all other factors constant, N889.2bn in Q1 2021 points to significantly higher tax revenues for 2021. That said, the country’s tax revenue to GDP ratio remains at an abysmal single-digit rate (4.9% in 2020).