Federal Government plans to reduce corporate income tax rate in next two years – Taiwo Oyedele

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, has said that the Federal Government hopes to reduce corporate income tax in the coming years.

This was stated during his presentation at the Access Corporate Forum 2024 organised by Access Holdings Plc in Lagos.

According to him, the federal government seeks to reduce the tax burden on companies and prioritize tax collection efficiency to increase government revenues.

He stated: “As the honourable Minister said, we are also reducing the corporate income tax rate from where it is now to a much lower rate over the next one to two years.”

In Nigeria, companies are subject to three rates of corporate income tax (CIT) based on their turnover: 30% for large companies with a turnover of more than N100 million, 20% for medium-sized companies with a turnover between N25 million and N100 million, and 0% for small companies with a turnover of less than N25 million.

However, it could also attract investors to the country, something the federal government is very keen to do.

New VAT regime

He also announced plans to remove taxes on basic items of daily use of people such as food, education, transportation and others. According to him, the removal of taxes on these items will encourage production and reduce inflation.

He also noted that under the proposed Value Added Tax (VAT) regime, businesses would be able to recover input credits on their assets and services, which would help reduce inflation and eliminate VAT costs borne by businesses.

What you should know

The National Bureau of Statistics (NBS) reports that Nigeria’s corporate income tax Corporate tax collection increased by 150.83% in the second quarter of 2024, reaching N2.47 trillion. This marks a significant increase from the N984.61 billion collected in the first quarter of the year, where there was a 12% decrease from the fourth quarter of 2023.

• The sharp rise in corporate tax collections in the second quarter was largely due to a remarkable 87.24% increase in overseas corporate tax payments which amounted to N1.11 trillion, more than double the amount recorded in the same period last year. This is due to the currency unification policy which saw the naira lose more than 100% of its value since its enactment.

• Foreign companies have reaped the benefits of currency unification, while local companies have encountered more difficulties.

• Foreign corporate income tax (CIT) increased by 140.5% from N1.42 trillion in the year before unification (Q3 2022 to Q2 2023) to N3.41 trillion in the year after unification. In comparison, local CIT saw a more modest growth of 35.1% from N2.16 trillion to N2.92 trillion over the same period.