Nine banks have contributed over N31bn into government coffers as tax payment for the first quarter ended March 31, 2022.
In its expression, income tax refers to a type of tax that governments impose on income generated by businesses and individuals within their jurisdiction. ‘’By law, taxpayers must file an income tax return annually to determine their tax obligations.
In real terms, income taxes are a source of revenue for governments. They are used to fund public services, pay government obligations, and provide goods for citizens.
Along this line, every bank which operates in Nigeria is by law obligated to file an income tax return annually to state and federal government agencies where they have branches. Despite paying statutory rate of 30 per cent of total profit as company’s income tax, banks are meant to pay Education Tax, National Information Technology Development Agency (NITDA) Tax and Nigeria Police Trust Fund levy.
Whereas the tax each bank pays depends on the size of her income, the Federal government enjoys huge tax from the financial institutions annually.
Broken down, details show that GT Bank seemingly paid the highest income tax in first quarter 2022 posting about N11.077billion. Conversely, the Holdco had paid income tax of N8.136billion in 2021. On its part, Zenith Bank also paid a whopping N9.793billion in 2022, representing a 22 per cent increase from the N7.962billion it paid in the corresponding period in 2021.
Access Holding Company, also paid N7.735billion in 2022, representing 3.09 per cent increase from N7.705billion it paid in q1 2021.
As for Fidelity Bank, it paid an income tax of N810million in Q1, 2022 which is 49% higher than N543m in 2021. Ecobank paid N640.458million in Q1,2022 from N363.430million in 2021
Wema Bank paid N445.77million in Q1,2022, an increase118 per cent higher than N203.5million in 2021.
Union Bank also paid N286million , a 13% higher than N251million in 2021; Sterling Bank income tax increased by 80% to N198m from N110million in 2021. Unity Bank’s income tax rose 20% to N75.588million in 2022 from N62.742million in 2021 while Ecobank paid N33million in Q1,2022 as against N25.8million in 2021. Analysts believe that as incomes of banks expand, taxes to the government also grows. They also say that taxes from banks which runs into billions contribute substantially to the revenues of the Federal Government.
From 2018 to 2020, the Federal Inland Revenue Service (FIRS), and other tax authorities in countries where Nigerian banks operate, generated a total of N450.2billion as tax income from six Domestic- Systemically Important Banks (D-SIBs) in three years, a report by the National Bureau of Statistics (NBS) had revealed.
These six D-SIBs are GTCO Plc (formally Guaranty Trust Bank), Zenith Bank Plc, Ecobank Transnational Incorporated Plc, FBN Holdings Plc, Access Bank Plc, and United Bank for Africa (UBA) Plc.
In the fiscal year 2022 , the Federal Government projected a revenue target of N10.7trillion.
The Minister of Finance, Zainab Ahmed disclosed at the public presentation and breakdown of the highlights of 2022 Appropriation Bill that the figure is 32 percent higher than the N8.1trillion projected in 2021.
She had revealed that the Federal Government generated N3.93 trillion, being 73 per cent of its targeted N7.9 trillion revenue for 2021.
A total of N2.5 trillion is expected from domestic sources and N2.5trillion from foreign sources. Also, N1.1 trillion will be from bilateral loans and N90 billion from privatisation proceeds.
It will be recalled that President Muhammadu Buhari had in December 2021 signed a record N17.13 trillion 2022 appropriation bill into law.
The Senate and House Representatives had jerked up the budget spending by N735.8 billion from the proposed N16.391tn to N17.126 trillion. They also raised the oil benchmark from $57 per barrel proposed by the executive to $62.
The national assembly also fixed oil production at 1.88 million barrels per day, exchange rate at N410.15 to the dollar, GDP at 4.2 percent and inflation at 13 percent.
Speaking at the event, Buhari said the 2022 Budget, just signed into law, provides for aggregate expenditures of N17.127 trillion, an increase of N735.85 billion over the initial Executive Proposal for a total expenditure of N16.391 trillion.
The President had announced that as the 2023 Budget was going to be a transition budget, work would start in earnest to ensure early submission of the 2023-2025 Medium-Term Expenditure Framework and Fiscal Strategy Paper as well as the 2023 Appropriation Bill to the National Assembly.
But there are doubts that the government can hit her revenue target of N10.7trillion given the weak economy. Though the Gross Domestic Product grew by about 4 % in the first quarter 2022, the operations environment does not give much hope in terms of very impressive economic expansion at the close of business year.
Analysts believe that the Nigerian economy is in dire straits. About 40%(80-100m) of Nigerians are wallowing in extreme poverty ;food production is expected to decline given to fertilizer shortages due to Russia/Ukranian war; Nigeria has also not fully recovered from the devastating impact of Covid-19; the growing insecurity which has hampered agricultural activities is taking a different toll on Nigeria’s food security; food inflation according to NBS stood at about 17.2%; over N6trillion deficit is tugging at the N17trillion budget for 2022 and the bulk of debt servicing will also come from that money; the value of the naira keeps declining and the Country remains unproductive; unemployment and underemployment rates stood at 33% and 22% respectively. This is even as headline inflation remains high at about 16%.
More worrisome however, is the fact that the country’s total direct remittances dropped by $119.4m (48%) to $130.12m as of January 2022 from $249.52m as of December 2021; FG targets total debt stock of about N46.63trn which it services with about 95% of its revenue. And most problematic is political instability in the Country.
For many an analyst then, this scary scenario does can hardly favour economic growth and engender a higher income tax showing. Would they be proved wrong?