H1 2022: Dangote Cement, MTN Lead Others in N330.9bn Tax to Revenue Agencies
Amid severe macro economic challenges, a total of 18 companies operating in Nigeria and other African countries remitted N330.9 billion to revenue agencies in the first half (H1) of 2022, an increase of 35 per cent from N245.18 billion reported in the first half of 2021.
By law, companies operating in Nigeria remits Corporate Income Tax (CIT), Education tax, National Information Technology Development Agency tax (NITDA), and Nigeria Police Trust Fund levy.
In Nigeria, the 30 per cent CIT is a tax collected from companies and the amount is based on the net income a company generated while exercising its business activity.
Revenues from these companies are an important source of income for the federal, state and local governments where these companies operate.
According to the National Bureau of Statistics (NBS), a total of N532.48 billion was remitted as CIT for first quarter (Q1) 2022, a growth rate of 53.09 per cent on a quarter-on-quarter basis from N347.81billion in the fourth (Q4) 2021.
As posted on the Nigerian Exchange Limited (NGX), Dangote Cement Plc, followed by MTN Nigeria Plc, Seplat Petroleum Plc and Ecobank Transnational Incorporated (ETI) led others in tax remittance to governments where they operate.
As at the time of filing this report, the likes of Zenith Bank Plc, United Bank for Africa Plc, among others are yet to release audited financial half-year financial statements for the period ended June 30, 2022 to investing public.
The breakdown showed that Dangote Cement reported N92.79billion tax expenses in H1 2022, an increase of 3.5 per cent from N89.6billion reported in H1 2021, while MTN Nigeria’s announced about 18.7 per cent increase in tax expenses to N87.01billion in H1 2022 from N73.3billion reported in H1 2021.
The CEO, MTN Nigeria, Karl Toriola in a statement explained that tax paid was on investments in government securities following the expiration of the 10-year tax exemption period, and the education tax rate increased to 2.5 per cent.
However, Seplat petroleum reported N51.85billion tax expenses in H1 2022 from N10.12billion reported in H1 2021, while Totalenergies Marketing Nigeria reported N4.2billion tax expenses in H1 2022, representing an increase of 13.22 per cent from N3.71billion reported in H1 2022.
In the banking sector, ETI reported N13.75billion tax expenses in Q1 2022 from N10.34billion in Q1 2021, as FBN Holdings in its unaudited financial statement announced N9.12billion tax expenses in H1 2022 from N7.15billion reported in H1 2021.
Experts had attributed growth in tax expenses to pending tax accrued by these companies, stressing that a significant increase in profit also drives growth in tax expenses in the period under review.
Speaking with THISDAY, Fiscal Policy Partner and Africa Tax Leader, at PwC, Mr. Taiwo Oyedele attributed the hike in tax expenses by listed firms to payment of deferred tax liabilities.
According to him, the tax expenses reported in H1 2022 is not the amount companies definitely remitted due to deferred tax.
He explained further that, “You will have to take into account that a company can always report N1billion as tax expenses but the amount remitted to FIRS, among other agencies might be N400 million.
He stated further that tax expenses differ by sector, adding, “Specifically, the banking sector has a different pattern from the manufacturing sector. The banking sector has a lot of tax exemptions including government bonds which those in the manufacturing sector are not enjoying.”
Oyedele noted that increasing tax expenses due to improved business activities in the country is good for the nation’s economy, stating that, “increasing tax expenses over government policies that seems to impose additional burden is not a welcome development. In the final quarter of 2021, one of the changes was increasing the education tax from two per cent to 2.5 per cent.
“Definitely, what companies pay on education tax is expected to increase as government policy has increased the tax burden on them. It can have a negative impact because companies have to pay taxes that could have been used to invest and expand.
“It could be positive if the government collects these funds and uses it well for our universities not going on strike actions across the country. If companies are paying education tax and universities are on strike, you begin to ask yourself if it makes sense or not. The government is depriving companies of opportunities to invest and the education sector is not improving. It is like companies are getting hit at two fronts.”
Analyst at PAC Holdings, Mr. Wole Adeyeye noted that aggressive growth in profit before tax impacted listed companies’ tax expenses, stressing that the increased business activities post-covid-19 boost companies’ revenue drives.
According to him, “the likes of Dangote cement, MTN Nigeria and Nigerian Breweries grew revenue that impacted on profit before tax. When a company reports growth in profit before tax, it is expected to reflect on tax expenses.”