Taxes paid by Nigerians involved in wholesale and retail trade, as well as the repair of motor vehicles and motorcycles, surged by 49% in the first half of 2024, compared to the same period in 2023, according to the latest data from the National Bureau of Statistics (NBS).
The rise in tax revenue is attributed to increases in both Value Added Tax (VAT) and Company Income Tax (CIT) receipts.
The NBS report reveals that the total tax contribution from the sector reached N185.19 billion in H1 2024, up from N124.39 billion in H1 2023, despite ongoing economic challenges in the country.
VAT, set at 7.5%, saw collections grow by 50%, increasing from N63.24 billion in H1 2023 to N94.76 billion in H1 2024, signaling robust consumer spending even in a high-inflation environment.
Meanwhile, CIT, pegged at 30% on corporate profits, rose by 48%, climbing from N61.14 billion to N90.43 billion over the same period, reflecting the profitability of businesses despite rising operational costs.
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A sequential comparison with the second half of 2023 further underscores the growth in tax revenue, with a 44% increase between H2 2023 and H1 2024.
This surge in tax collection, from N128.68 billion in H2 2023, indicates stronger tax enforcement and sustained economic activity, albeit influenced by inflation.
The rise in VAT collections, in particular, reflects the inflationary impact on the cost of goods and services, while businesses have had to grapple with increased input costs, fuel prices, and other operational expenses, contributing to higher CIT payments.
Nigeria’s complex tax landscape, marked by over 60 official and 200 unofficial taxes, has long posed challenges for small businesses.
Multiple taxation from federal, state, and local governments continues to weigh heavily on small enterprises, including petty traders and artisans.
In response, the Presidential Committee on Fiscal Policy and Tax Reforms, led by Taiwo Oyedele, has called for tax unification and the reduction of “nuisance taxes” that do not contribute to state revenues.
The Manufacturers Association of Nigeria (MAN) has also urged authorities to streamline taxes, arguing that the current system hampers business growth.
In a bid to bring the informal sector into the tax fold, the Federal Inland Revenue Service (FIRS) introduced the VAT Direct Initiative (VDI) in July 2023, which targets VAT collection from informal traders.
Market traders with a turnover below N25 million are exempt under the VDI, as part of efforts to curb multiple taxation and prevent non-state actors from engaging in extortionate tax practices.
Additionally, the FIRS launched the Integrated Market Revenue Management System (IMRMS) in December 2023 to integrate the informal sector into Nigeria’s tax system, aligning with broader reforms aimed at reducing the tax burden on small businesses.
As part of its fiscal strategy, the federal government is working to reduce the number of official taxes to no more than 10, while also recommending that state and local governments suspend unnecessary levies that offer little value to state finances. These new tax regulations are intended to simplify the tax system and ease the burden on business owners, encouraging growth and stability in Nigeria’s economy.