Taxes paid by traders, others nearly doubled in 2023 amidst inflation, multiple taxation concerns

Wholesale and retail traders as well as mechanics for motor vehicles and motorcycles, have had their total tax contributions rise by 98% with their total tax paid in 2023 hitting a record N253.07 billion.

Surprisingly, the total tax collected from these group of people in 2022 was N127.89 billion.

Data released by the National Bureau of Statistics (NBS) revealed that this sharp increase in tax revenue can be blamed on the hikes in both Value Added Tax (VAT) and Company Income Tax (CIT) receipts.

The Federal Inland Revenue Service (FIRS) explains that CIT, which is pegged at 30%, is levied on the profit of corporations, while VAT — set at a rate of 7.5% — is a consumption tax imposed at the point of sale on goods and services.

Tax payments breakdown:

1. The year 2022 saw VAT revenues at approximately N67.82 billion, with CIT contributing about N60.06 billion.

2. A marked uptick in 2023 pushed VAT revenues to roughly N138.10 billion, more than a 100% increase, while CIT collections surged to nearly N114.96 billion, almost doubling from the previous year.

In an environment experiencing inflation, the price tags on goods and services rise. VAT, being inherently tethered to the sale price as a consumption tax, also increases.

For instance, a product that cost N1,000 in January and carried a VAT of N75 at 7.5%, would, with a price hike to N1,100 in December, yield a VAT of N82.50, notwithstanding a stagnant sale volume.

BEB