SAT, JUNE 24 2023-theGBJournal |According to the National Bureau of Statistics (NBS), collections from Company Income Tax (CIT) declined by 37.8% q/q to N469.01 billion in Q1-23 (Q4-22: N753.88 billion).
We believe the decline was primarily driven by the reduction in business activities orchestrated by the adverse impact of the cash scarcity induced by the CBN’s naira redesign drive.
Accordingly, both local collections (-15.0% q/q to N300.78 billion | 64.1% of total collections) and foreign CIT payments (-57.9% q/q to N168.23 billion | 35.9% of aggregate collections) declined in the review period.
On a year-on-year basis, total CIT collection declined by 15.0% (Q1-22: N551.53 billion). With the cash scarcity episode now behind us, we expect CIT collections to increase in the coming quarters in line with the tax provisions of the 2023 Finance Act and Fiscal Policy measures and improvement in domestic economic activities despite downside risks.
Key risks to corporates and, subsequently, CIT collections in the near term include further increases in operating costs arising from FX liberalisation and lingering rises in energy costs.
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