NGX-listed Firms Remit N215.9bn Tax To FIRS, Others In Q1
As a result of their expansion in Nigeria and other African countries, the likes of Dangote Cement Plc, MTN Nigeria Communication, Seplat Energy Plc, Guaranty Trust Holding Company Plc (GTCO) and 20 other companies remitted N215.9 billion in tax to the Federal Inland Revenue Service (FIRS), among other revenue generating agencies.
This represents a 61 per cent increase over the N133.42 billion reported by these 24 companies in the first quarter of 2021.
The 24 companies are made up of cement manufacturing, telecommunication, oil & gas, financial institutions and Fast-Moving Consumer Goods (FMCG) companies listed on the Nigerian Exchange Limited (NGX).
Companies operating in Nigeria are expected to remit corporate tax, information technology tax, tertiary education tax, among others to federal government agency, state revenue generating agencies and agencies in countries where they have branches.
Dangote Cement followed by MTN Nigeria remitted most tax expenses in the period under review.
Dangote Cement in Q1 2022 tax expenses rose by 25.14 per cent to N50.55billion as against N40.39billion reported in Q1 2021, while MTN Nigeria reports N46.77billion tax expenses in Q1 2022, representing nearly 60 per cent increase from N29.2billion reported in Q1 2021.
The Chief Executive officer, MTN Nigeria, Karl Toriola in a statement stated that: “We have continued to make good progress in the first quarter, building on the momentum we achieved in Q4 2021 and delivering several key milestones as we grow our connectivity business and platforms.
“This was achieved against a backdrop of significant geopolitical volatility exacerbated by the war in Ukraine. This conflict has significantly impacted energy prices, broader inflation, supply chains and consumer spending.
“Nevertheless, I am pleased that we have made significant strides in deepening our relationships with all our stakeholders while substantially enhancing our contributions to government revenue.
“In recognition of our remarkable performance in remittance of taxes despite the challenges posed by the pandemic, the FIRS recognised MTN Nigeria as a top 20 taxpayer and one of the best tax compliant organisations in Nigeria for the 2021 tax year.”
Further extracts from listed companies unaudited Q1 2022 results showed that Seplat petroleum reported N26.4billion tax expenses from N1.19billion reported in Q1 2021, while Totalenergies Marketing Nigeria reported N2.2billion tax expenses in Q1 2022, representing an increase of 58.5 per cent from N1.38billion reported in Q1 2022.
In the banking sector, Ecobank Transnational Incorporated (ETI) reported N13.75billion tax expenses in Q1 2022 from N10.34billion in Q1 2021, as GTCO’s tax expenses rose by 36 per cent to N11.08billion in Q1 2022 from N8.2billion reported in Q1 2021.
Finance experts have attributed growth in tax expenses to pending tax accrued by these companies, explaining that significant increase in profit also drives growth in tax expenses in the period under review.
The 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 Q1 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 N400million.
“If a company reports an increase in profit, its expenses expected to go up and if you come from a period you made losses to a period when you’re making profit, such a company expects its tax expenses to go up because they are ways you upset your losses before paying taxes. It has an impact on hike in tax expenses declared by the company.”
He noted that increase in capital assets investment likely impacted these companies’ tax expenses.
He explained that, “The more companies are investing in new equipment, plant, the lower their tax expenses because they have a lot of capital allowances. But if they are no longer investing a lot in capital assets, tax expenses will increase because their capital allowances are going to drop.”
He stated further that tax expenses differ by sectors, saying “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. 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 explained aggressive growth in profit before tax impacted on listed companies tax expenses, stressing that the increased economy 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.
However, analysts at FBNQuest Capital Research had noted that the increase in the tax expenses take is commendable. However, it is still abysmally low even when viewed from an emerging market context.
According to the Research team at FBNQuest, “The International Monetary Fund (IMF) recently noted that Nigeria’s consolidated government revenue-to-GDP ratio at 7.5 per cent is one of the lowest in the world. The story is worse if we narrow down on non-oil revenue-to GDP which is roughly around 4.3 per cent,” the report stated.
It further added that some new revenue provisions in the Finance Act 2021, such as capital gains on the sale of shares worth more than N100 million, excise levies on non-alcoholic sweetened beverages, and e-commerce taxes, are expected to enhance non-oil revenue. “However, we believe the Federal Government’s non-oil revenue projection of N7.1trillion in the 2022 budget is quite a stretch.”