VAT, CIT Growth, Sign Of Improved Economic Activities -CSL Research

The 40.2 per cent  and 20.1per cent  year on year ( y/y) growth to N1.5trillion and N1.3trillion of total Value Added Tax (VAT) and Company Income Tax (CIT) collections respectively,for the nine months 2021 signals improved economic activities.

Lagos-based investment analysis firm, CSL Research, which disclosed this on Tuesday in a note to clients stated that the combined amount of N2.8trillion is already above the prorated nine months 2021 budgeted N2.5trillion for VAT and CIT in 2021 by 13.8per cent.

“So we expect 2021 performance for VAT and CIT to significantly outpace 2020 numbers of N2.8trillion.

“We note the VAT increase to 7.5per cent became effective in February 2020, leaving only 1 month of lower VAT,” the firm observed.

Excluding any growth attributable to currency adjustments, analysts at CSL Research noted, can safely conclude that some of the growth seen is largely due to improving macro-economic conditions.

The National Bureau of Statistics (NBS) published data on the revenue generated from both Value Added Tax (VAT) and Company Income Tax (CIT) collections in third quarter (Q3) 2021.

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The total VAT collected in Q3 2021 was N500.5billion, a slight decline of 2.3per cent quarter on quarter  (q/q) from N512.3billion in Q2 2021.
Y/y, Q3 VAT numbers rose by 17.8per cent y/y relative to N424.7billion in Q3 2020.

On the other hand, CIT collections increased to N472.5billion in Q3 2021, showing a flattish growth of 0.1per cent from Q2 2021 and beating the N416.0 billion generated in Q3 2020 by 13.6% y/y.

According to the analysts, the growth in CIT collections may be due to improved corporate performances, leveraging the continued macroeconomic recovery.

Further analysis of the contribution to VAT revenue collected solely in Q3 2021 revealed that VAT on locally produced goods (i.e., non-import VAT) alongside Nigerian Customs Service (NCS)-Import VAT were the silver lining as non-import (foreign) VAT declined by 60.9per cent q/q and 29.6% y/y.

“We believe the growth in VAT on locally produced goods (+57.6% q/q and +37.6% y/y) reflects the gradual recovery in consumption.

“For CIT collections, foreign CIT payment largely drove the q/q increase (up 249.8% q/q to N180.5bn) as local CIT declined by 30.1per cent q/q to N292.0billion in Q3 2021.

“We believe the growth in foreign CIT payment may be partly due to the impact of currency adjustments. No revenue was generated from other payments in Q3 2021,” the firm stated.