By 
Despite widespread economic challenges, product taxes in Nigeria soared to N1.36tn during the initial six months of 2023, marking a significant increase of 113.29% from N636.19bn recorded during the same period in 2021. This also represents a 25.00% rise from the N1.09tn figure for the corresponding period in 2022. These statistics, based on current basic prices, have been sourced from data on Net Indirect Taxes on Products by the National Bureau of Statistics.
When adjusting for inflation, the product taxes for the first half of 2023 reached N465.94bn, marking a notable growth of 34.98% from the N345.19bn recorded in the first half of 2021. This figure also represents an 11.94% increase from the N416.23bn reported during the corresponding period in 2022.
Net indirect taxes, as defined by the World Bank, represent product taxes less subsidies. Product taxes pertain to taxes payable by producers in relation to the production, sale, purchase, or utilization of goods and services.
Despite these surging product taxes, Nigeria’s Gross Domestic Product experienced a year-on-year growth of 2.51% in real terms during the second quarter of 2023. This growth was lower than the 3.54% recorded in the same period in 2022, and it has been attributed to the ongoing challenging economic conditions.
In response to the global economic downturn impacting revenue, the Federal Government has been intensifying its tax collection efforts. Its 2023-2035 Medium Term Expenditure Framework and Fiscal Strategy Paper outlined strategies to enhance revenue generation. This involves improving tax administration processes, introducing new or elevated pro-health taxes, and eliciting mixed responses from the public.
The rise in year-on-year product taxes contrasts with the declining purchasing power within the nation, as inflation soared to 22.79% in June. High inflation has contributed to increased poverty rates, pushing approximately four million Nigerians into poverty between January and May 2023, according to the World Bank.
Furthermore, inflation is projected to persist and could reach 25% by the end of 2023. The global financial institution noted, “Headline inflation is expected to rise from 18.8% in 2022 to 25% in 2023.”
Amid these circumstances, the International Monetary Fund has recommended that Nigeria raise its Value Added Tax (VAT) rate to 15% by 2027. Such a move could further augment the revenue generated from product taxes and subsequently lead to increased product prices.
Comments