Tax stats unearth Covid-19 most vulnerable sectors

ON Wednesday, the National Bureau of Statistics (NBS) released the 2020 full-year data showing how much Nigeria milked from the economy in form of value-added tax (VAT) and company income tax (CIT) as coronavirus held sway. The figures may as well be the ultimate verdict of the usefulness or otherwise on the fiscal interventions.

Overall, there was about a 10 per cent increase in the combined income from the two sources. The figure rose from N2.68 trillion generated in 2019 to 2.94 trillion. But while CIT, which stood at 1.4 trillion, fell by about 13.5 per cent when compared with 1.6 generated in 2019, VAT recorded a modest improvement. 

 However, the increase in VAT is strongly connected with the 50 per cent increase in VAT rate last February. The rate was reviewed upward from five per cent to 7.5 per cent amidst protests from different interest groups.  

The breakdown as contained in analysis documents released by NBS indicates that Q3 witnessed the most impressive performance with its VAT earnings stood at N840.7 billion. Over N700 billion was generated in Q4 and Q2 while N620 billion was recorded in Q1, making it the least contributing quarter.

VAT accounted for N1.53 trillion or 52 per cent of the total figure while N1.41 trillion was earned from the CIT, showing the resilience of the local businesses despite the severe COVID-19.

Professional services (including telecoms) and banks/other financial institutions led last year’s CIT revenue drive with N180.3 billion and N96.4 billion respectively. While banks and other financial institutions’ contribution to the CIT fell by about 48 per cent (compared to N142.7 billion realised from the sector in 2019), professional service recorded a slight improvement, as it rose from N177.7 billion recorded in 2019 to suppose N180.3 billion.

The rise in professional service, which is driven majorly by telecoms, is understandable. As individuals and businesses cut physical meetings, they switched to virtual engagements and increased their budget on data. Hence, the telecoms operators were immune against the bug that saw transactions, including financial-related ones, nose-diving. 

Other top contributors to CIT incomes are other manufacturing (N80.2 billion), commerce and trading (N65.6 billion), breweries, bottling and beverages (N53.2 billion), state ministries and parastatals (N49 billion), transport and haulage (N45.5 billion), oil-producing (N40.8 billion) and federal ministries and parastatals (N22.5 billion).

The laggards were the textile and garment industry (N360 million), mining (N343.2 million), local government councils (N1.1 billion), chemicals, paints and allied industries (N2 billion) and publishing, printing and packaging (N2.1 billion). 

But interestingly, textile and garment recorded the highest year-to-date (YTD) improvement with over 100 per cent jump in its CIT generation. On the flip side, the contribution of petrochemical and petroleum refineries, understandably, fell by 45 per cent YTD to lead sectors with the least improved contribution.

In the fourth quarter, the country generated N454.7 billion from VAT, making it the topmost quarter. The first quarter was the poorest with 324.6 billion revenue. The trend was different from what was obtained in 2019 when the second quarter topped followed by the fourth with the third coming last. 

According to sectoral analysis data sourced from NBS documents, the government received N763 billion from non-import (local) VAT, N420.4 billion from non-import (foreign) VAT and N347.7 billion from the Nigeria Customs Service (NSC)-import VAT. 

Professional service recorded N162.3 billion to emerge as the top contributing sector followed by other manufacturing with N154.2 VAT revenue. Mining recorded N251 million to take the least position in terms of value addition to VAT revenue.

The income generated from CIT and VAT, two key indices that show the overall health of the economy, was the highest in the past five years. But the amount generated last year is merely 0.67 trillion or 30 per cent higher than N2.27 trillion realised in 2015. 

Still, the difference is only useful for nominal analysis as other factors different business transaction volumes would have been responsible for the rise. For instance, last year’s VAT income was boosted by the 50 per cent increase in rate. Escalating inflation has also pushed up the value of transactions even though the volume activities would have fallen.