H1 2024:  Banks, Others Pay N790.7bn Tax to Federal Govt

Kayode Tokede

Five deposit money banks and 12 other top companies listed on the Nigeria Exchange Limited (NGX), paid the Federal Inland Revenue Service (FIRS), and other revenue agencies a sum of N790.7billion as tax expenses in half year (H1) ended June 30, 2024, a significant increase of 191.3er cent from N271.4billion in the corresponding half year of 2023.

The companies are made up of power generating companies, petroleum marketing, cement manufacturing, among other sectors operating in Nigeria and outside.

Aside from Nigerian Breweries Plc, and Dangote Sugar Refinery Plc that reported losses due to hike in operating expenses and foreign exchange losses, the combined companies generated N2.24 trillion profit after tax in H1 2024, representing an increase of 101.4per cent from N1.11 trillion in H1 2023.

Aside from paying the statutory 30 per cent income tax, companies operating in Nigeria are meant to pay Education tax, National Information Technology Development Agency (NITDA) tax and Nigeria Police Trust Fund levy.

The tertiary education tax is imposed on every Nigerian company at the rate of 2.5 per cent of the assessable profit for each year of assessment, while the Act that established the Nigeria Police Trust Fund was meant to receive funds from a levy of 0.005 per cent of the net profit of companies operating a business in Nigeria and other various sources, which will be utilized for the training and welfare of personnel of the Nigerian Police Force.

In the period under review, Seplat Energy paid the highest tax expenses, followed by Zenith Bank Plc.

Seplat Energy reported N175.99 billion tax expenses in H1 2024, representing an increase of 12302 per cent from N1.42 billion reported in H1 2023. 

The company in its unaudited result and accounts for the period explained that, “The income tax expense of N175 billion for the interim period includes a current tax charge of N95.1 billion and a deferred tax charge of N84.4 billion based on the 2024 full year projected effective tax rate (ETR) of 72 per cent.

“This approach is in line with IAS 34 30c which states: “Income tax expense is recognized in each interim period based on the best estimate of the weighted average annual income tax rate expected for the full financial year.

“Amounts accrued for income tax expenses in one interim period may have to be adjusted in a subsequent interim period of that financial year if the estimate of the annual income tax rate changes.

“The split between current and deferred tax charge was determined using management’s estimate of the full year weighted average effective annual income tax rate expected for individual taxable entities within the group.”

The huge tax expenses reduced the indigenous oil & gas company profit to N68.06 billion in H1 2024, an increase of 62 per cent from N42.03 billion reported in H1 2023. 

Zenith Bank’s tax expenses stood at N149.03 billion in H1 2024, about 154.2per cent increase from N58.63 billion reported in H1 2023. 

The lender reported N578 billion profit in H1 2024, about 98 per cent increase from N291.73 billion reported in H1 2023.

 Analysts expressed the importance of companies remitting taxes to government agencies, stressing on the role played by listing on the Exchange that gives room for companies to be transparent in tax payment to government agencies where they operate.

They added that the new government reforms may hike tax expenses on listed companies.

The Vice-President, Highcap Securities Limited, Mr. David Adnori projected that listed companies may be paying more taxes this year, stressing on its importance on shareholders’ return.

He expressed that failure to pay tax by listed companies might force the government to shut branches and truncate operations, stating that the tax system in Nigeria must be streamlined to enhance effective remittance in order not to create dispute between the company and the government.

He, however, added that tax remittance is meant to facilitate economic growth and companies must always oblige in promoting remittance, most especially to state governments where they have branches.

According to him, taxes paid by companies are based on laws and regulations, stressing that companies are meant to play by the rules, which has to do with full disclosure.

He explained further that, “A good number of income that companies generate are exempted from tax. Banks are not meant to pay tax income on treasury Bills, government bonds and agriculture loans.

“If you take all of those, sometimes you will find out that tax banks are paying effectively on their profit, maybe less compared to manufacturing companies, not that they are not deliberately not paying taxes.”

He stressed the need for banks to come together and make a total tax income contribution to the country’s Gross Domestic Product (GDP).

On his part, Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion stated that listed companies over the years maintained stronger profit, which is meant to contribute to government tax revenue.

He said most companies that were reluctant to come to the stock market were hiding their financials or were scared of take-over by wealthy Nigerians. He said: “Once the government can work together with the FIRS to enforce tax laws, there would be no hiding place for companies. Thus, they will be forced to come to the market.”

President Bola Tinubu had approved the establishment of a Presidential Committee on Fiscal Policy and Tax Reforms and appointed Taiwo Oyedele as the chairman of the committee.

The government said the establishment of the committee reflects Tinubu’s commitment to addressing challenges and bringing about transformative reforms in fiscal policy and taxation.