Taxes imposed on goods within the country surged to N1.36tn during the initial half of 2023, despite widespread economic difficulties.
This increase reflects a significant 113.29% surge from the N636.19bn reported in the first half of 2021, as well as a 25.00% rise from the N1.09tn documented in the same period of 2022.
These statistics were sourced from National Bureau of Statistics data focusing on Net Indirect Taxes on Products, calculated using present base prices.
When considering the impact of inflation, the taxes on products tallied up to N465.94bn during the first six months of 2023.
This showcases a substantial 34.98% escalation from the N345.19bn reported in the initial half of 2021 and an 11.94% rise from the N416.23bn noted in the corresponding period of 2022.
As described by the World Bank, net indirect taxes encompass the aggregate of product taxes minus subsidies.
The bank clarified that product taxes pertain to the payments manufacturers bear concerning the production, sale, purchase, or utilization of goods and services.
In the second quarter of 2023, the country’s Gross Domestic Product (GDP) grew by a real-term rate of 2.51% on a year-on-year basis.
This figure represents a decline from the 3.54% registered in Q2 2022, with the National Bureau of Statistics suggesting this might be attributed to challenging economic circumstances.
Confronted with a reduction in global economic activity and the consequent drop in revenue, the Federal Government has been intensifying its taxation initiatives.
Outlined in the 2023-2035 Medium Term Expenditure Framework and Fiscal Strategy Paper, these efforts encompass an enhancement of the tax administration framework, which includes tax filing and payments.
Additionally, the government aims to introduce new taxes and potentially elevate existing ones, particularly in the realm of health-related taxes on items such as sugar-sweetened beverages, tobacco, and alcohol.
This strategy has been met with mixed reactions from the public.
Remarkably, the year-on-year rise in product taxes has taken place amid a decline in purchasing power across the country, evidenced by a 22.79% inflation rate in June.
The World Bank highlighted that this decrease in purchasing power resulting from high inflation has exacerbated poverty, causing approximately four million Nigerians to fall below the poverty line between January and May 2023.
Anticipations suggest that inflation will continue to surge, possibly reaching 25% by the end of 2023.
The World Bank’s forecast indicated, “Headline inflation is expected to rise from 18.8% in 2022 to 25% in 2023.”
Meanwhile, the International Monetary Fund (IMF) has been advising Nigeria to raise its Value-Added Tax (VAT) rate to 15% by 2027. Such a move could potentially further amplify the revenue generated from product taxes, subsequently influencing product prices.
