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Illustration of income tax
In the third quarter of 2024, ten major sectors in Nigeria raked in N857.3 billion as Company Income Tax (CIT) to the Federal Government, raising more revenue compared to N601.3 billion in the same quarter last year.
The sectors are manufacturing, mining, and quarrying, information and communication, financial and insurance activities, public administration and defence, and compulsory social security.
Others are electricity, gas, steam and air conditioning supply, wholesale and retail trade, repair of motor vehicles and motorcycles, transportation and storage, professional, scientific and technical activities, and other services.
Data from the Federal Inland Revenue Service (FIRS) and the National Bureau of Statistics (NBS) revealed that Company Income Tax (CIT) for Q3 2024 declined by 28.2 percent to N1.77 trillion from N2.47 trillion in Q2 2024.
“Local payments received were N920.91 billion, while foreign CIT payments contributed N852.29 billion in Q3 2024,” it said.
CIT, also known as corporate tax, is a tax levied on the profits made by companies operating in Nigeria. It is regulated by the Companies Income Tax Act (CITA) under the supervision of the Federal Inland Revenue Service (FIRS).
Despite economic headwinds, the manufacturing sector recorded the highest contribution with 25.47 percent, followed by mining and quarrying with 18.37 percent; and information and communication with 15.07 percent.
While there are moderate increases in companies’ income taxes. they do not equate to a rise in business profitability but reveal the amount of revenue generated by the federal government per sector.
Here are the top 10 sectors that paid most taxes in Q3 2024
Manufacturing
The manufacturing sector contributed N234.6 billion to the federal government revenue in the three months to September compared to N155.7 billion in the same quarter last year.
the sector has continued to demonstrate resilience despite struggling with rising electricity tariffs that has led to higher energy costs, exchange rate volatility, and a 28-year inflation.
These headwinds have resulted in weakening purchasing power and backlog of unsold inventory which is eating into their profits. Their woes are compounded with an 875 basis points rise in interest rate in a year, limiting expansion and raising borrowing costs.
Despite these factors, manufacturers incurred more taxes that significantly hindered their business growth and profitability in Q3 2024.
Mining and quarrying
In Q3, company income tax from the mining and quarrying sector was the second highest, rising to N169.4 billion from N77.3 billion in Q3 2023.
Despite weak institutional reforms and policies stalling the country’s mining industry growth, the mining and quarrying sector incurred more taxes in Q3 2024.
Information and Communication sector
The contribution of this sector’s revenue to the federal government revenue declined by 22.9 percent to N138.8 billion in Q3 2024 from N170.6 billion in Q3 2023 due to an increase in regulatory burdens, changes in tax policies, rising inflation, and exchange rates fluctuation.
This sector covers technology and IT services companies like Paystack and Flutterwave; Telecommunication companies like MTN and Airtel, and Internet Service providers like Spectrum and Smile.
Financial and insurance activities
This sector saw a 62.7 percent increase in its CIT contribution to N114.9 billion in Q3 2024 from N70.6 billion in the same quarter last year.
The rise in the contribution of this sector to the government’s purse could be attributed to the naira devaluation and the elevated interest rate environment which means companies’ borrowing costs will continue to rise as authorities remain hawkish.
Companies in this sector are Tier-1 and Tier-2 banks, Mortgage banks, Microfinance banks and insurance companies.
Public administration and defence, and compulsory social security
The Public administration and defence, and compulsory social security increased its CIT contributions to N62 billion in nine months of 2024 from N44.9 billion in Q3 2024.
Electricity, gas, steam and air conditioning supply
This sector’s company income tax contribution surged by 252 percent to N33.1 billion in Q3 2024 from N9.4 billion in the same period last year.
Wholesale and retail trade, repair of motor vehicles and motorcycles
The Wholesale and retail trade, repair of motor vehicles and motorcycles sector’s contribution to the federal government rose to N16.1 billion in the first quarter of the year.
Transportation and storage
In nine months of 2024, the company income tax of the transportation and storage sector rose to N29.9 billion from N15.2 billion in Q3 2024.
Professional, scientific, and technical activities
The professional, scientific, and technical activities contributed N14.9 billion in Q3 2024, a 75.9 percent increase from N8.5 billion reported in the same quarter of 2023.
Other services
Other services such as healthcare, legal, real estate, education, media, and entertainment contributed N26.8 billion in nine months of 2024 compared to N22.1 billion in Q3 2023. (BusinessDay)
