Banks and other financial institutions in the country generated a total sum of N28.05 billion as Value Added Tax (VAT) between January 2020 and the end of March tothis year, findings by New Telegraph show.
According to the latest data released by the National Bureau of Statistics (NBS) at the weekend, banks and other financial institutions generated the total sum of N3.28 billion and N24.77 billion as VAT in Q1’21 and 2020 respectively. This means that the Federal Government raked in a total sum of N28.05 billion as VAT from the financial sector in the 15-month period.
The figure is 24.2 per cent (N5.47 billion) higher than the N22.58 billion VAT generated by the sector between January 2019 and March 2020.
New Telegraph’s analy sis of NBS’ data shows that until it rebounded in 2020, the amount of VAT generated by banks and other financial institutions had been on a downtrend in recent years. For instance, while to
tal collections from VAT generated by the sector in 2016 stood at N25 billion, it declined by 17 per cent to N20.8 billion in 2017. It further dropped to N18.5 billion and N17.15 billion in 2018 and 2019 respectively.
Analysts attribute the surge in the amount of VAT generated by the financial sector last year to the Federal Government’s hike in the consumption tax from five per cent to 7.5 per cent in February 2020, as well as the Federal Inland Revenue Service’s (FIRS) automation of the VAT collection system.
In accordance with the VAT Act, all banks and financial institutions, except those granted exemption, are required to charge VAT on services rendered by them to their customers and account for the same to the FIRS.
The FIRS, as part of its efforts to achieve efficiency in the collection of the consumption tax, had, in March last year, issued a public notice informing taxpayers of automation of the VAT Collection System.
The Automated VAT Platform (VATrac), which commenced on April 1, 2020, according to the FIRS, enables efficient collection and remittance of VAT on relevant transactions in the wholesale/retail sector and direct audit/reconciliation of all VAT transactions.
In fact, a quarterly breakdown of banks and financial institutions’ collections from VAT, last year, shows that with the exception of the second quarter that recorded a drop in financial institutions’ collections from VAT, due to COVID-19 induced disruption of economic activities, other quarters saw an increase in VAT generated by the financial sector.
For instance, while the amount remitted by financial institutions to the government as VAT fell to N5.1 billion in Q2’20 from N5.4 billion in the previous quarter, it increased to N6.87 billion and N7.36 billion in Q3’ and Q4’20 respectively.
In its economic report for January 2021, the Central Bank of Nigeria (CBN) stated that “non-oil receipts in January 2021 outperformed collections in December 2020 and January 2020, by 3.0 per cent and 19.4 per cent, respectively. “A disaggregation of non-oil revenue revealed that Value-Added Tax (VAT), at N171.36 billion, accounted for 38.9 per cent of the non-oil revenue, while Corporate Tax, Customs & Excise Duties, FGN Independent Revenue and others, accounted for 23.9 per cent, 20.4 per cent, 15.2 per cent, and 1.6 per cent, respectively.
“Although VAT return was below its provisional benchmark, it exceeded receipts in the preceding month and the corresponding period of 2020 by 9.3 per cent and 49.3 per cent, respectively.”
Still, at N3.28 billion, the total amount of the financial sector’s collections from VAT in the first three months of this year, according to the NBS, was N2.16 billion less than the amount-N5.43 billion it generated in the previous quarter.
Analysts also note that in line with the trend in recent years, the amount of VAT generated by banks and financial institutions in the first three months of 2021 (N3.28 billion), was significantly less than what was generated by sectors such as manufacturing, professional services and state ministries and parastatals.
According to NBS’ data, of the sum of N496.39 billion generated as VAT in Q1’21, other manufacturing companies generated the highest amount of VAT with N49.41 billion, closely followed by professional services, with N42.50 billion and state ministries and parastatals, which generated N26.96 billion.