The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele has stated that the federal government hopes to reduce company income tax in the coming years. He stated this during his presentation at the Access Corporate Forum 2024 organised by Access Holdings Plc in Lagos.
According to him, the federal government is looking to reduce the tax burden on businesses whilst prioritising collection efficiency to increase government revenues.
He stated, “Like the honourable Minister said, we are also reducing the corporate income tax rate from where it is now to a much lower rate in the next one to two years”
In Nigeria, companies are subject to three Corporate Income Tax (CIT) rates based on their turnover: 30% for large companies with a turnover exceeding N100 million, 20% for medium companies with a turnover between N25 million and N100 million, and 0% for small companies with a turnover below N25 million.
However, it could also attract investors into the country- a high desire for the federal government.
New VAT Regime
In addition, he outlined plans to remove taxes on essential items used daily, such as food, education, and transportation. He stated that eliminating taxes on these items would encourage production and help curb inflation.
He also mentioned that under the proposed Value Added Tax (VAT) regime, businesses would be able to reclaim input credits on their assets and services. This measure is expected to reduce inflation and eliminate the VAT costs currently shouldered by businesses.
Things you should note
According to the National Bureau of Statistics (NBS), Nigeria’s Company Income Tax (CIT) collection surged by 150.83% in the second quarter of 2024, reaching N2.47 trillion. This is a significant increase from the N984.61 billion collected in the first quarter of the year, which saw a 12% decline from Q4 2023.
- The sharp rise in Q2 CIT collection was largely driven by an 87.24% increase in foreign CIT payments, totaling N1.11 trillion, more than double the amount recorded in the same period last year. This surge is attributed to the foreign exchange unification policy, which led to the Naira losing over 100% of its value since its enactment.
- While foreign companies have benefited from the FX unification, local businesses have faced more challenges.
- Foreign Company Income Tax (CIT) increased by 140.5%, rising from N1.42 trillion in the pre-unification year (Q3 2022 to Q2 2023) to N3.41 trillion in the post-unification year.
- In contrast, local CIT experienced a more modest growth of 35.1%, increasing from N2.16 trillion to N2.92 trillion during the same period.
