By Daniel Edu
Taxes imposed on products within the country have soared to N1.36tn during the initial six months of 2023, even as economic challenges persist across various sectors.
This represents a remarkable 113.29% upswing from the N636.19bn recorded in the corresponding period of 2021, and a substantial 25.00% rise from the N1.09tn registered in the same timeframe of 2022. These figures, acquired from National Bureau of Statistics data on Net Indirect Taxes on Products, are anchored on prevailing basic prices.
When adjusted to account for inflation, the product taxes amounted to N465.94bn in the first half of 2023, showcasing a noteworthy 34.98% escalation from the N345.19bn reported in the initial six months of 2021, and an 11.94% growth from the N416.23bn seen in the corresponding span of 2022.
As per the World Bank’s explanation, net indirect taxes encompass product taxes minus subsidies. The organization defines product taxes as levies payable by producers concerning the creation, sale, acquisition, or utilization of goods and services.
Despite the nation’s Gross Domestic Product experiencing a 2.51% year-on-year expansion in real terms in the second quarter of 2023, a decrease from the 3.54% achieved in Q2 2022, the National Bureau of Statistics suggested that this might be due to the ongoing testing economic circumstances.
With the global economic downturn influencing revenue streams, the Nigerian Federal Government has been intensifying its tax initiatives. The 2023-2035 Medium Term Expenditure Framework and Fiscal Strategy Paper outline various strategies for revenue enhancement.
In its statement, the government conveyed, “These strategies involve enhancing the tax administration structure, encompassing tax filing and payment processes, in addition to introducing new taxes or further escalating existing pro-health taxes, such as excise taxes on sugar-sweetened beverages, tobacco, and alcohol. These steps have evoked mixed responses from the public.”
The annual surge in product taxes occurs despite declining purchasing power in the nation, with inflation reaching 22.79% in June. The World Bank has stated that the erosion of purchasing power as a consequence of high inflation has driven around four million Nigerians into poverty between January and May 2023.
Inflation is projected to persist on an upward trajectory, predicted to reach 25% by 2023. According to the World Bank, “Headline inflation is projected to elevate from 18.8% in 2022 to 25% in 2023.”
Meanwhile, the International Monetary Fund has recommended that Nigeria increase its Value Added Tax (VAT) rate to 15% by 2027, a move that could further augment revenue generated from product taxes while potentially influencing product prices.