Business NewsEconomy

VAT collection surged by 101.65% year-on-year in Q1 2024 – NBS

The National Bureau of Statistics (NBS), in collaboration with the Federal Inland Revenue Service (FIRS), has reported a substantial increase in Value Added Tax (VAT) collections for the first quarter of 2024.

On a year-on-year basis, the total VAT collection in Q1 2024 surged by 101.65 per cent compared to Q1 2023. This indicates a doubling of VAT revenue within a year, showcasing the effectiveness of the government’s tax policies and the broadening tax base.

Also, the total VAT revenue for Q1 2024 stood at N1.43 trillion, marking a remarkable growth of 19.21 per cent from the N1.20 trillion collected in the previous quarter, Q4 2023.

Detailed Breakdown of VAT Contributions

  • Local Payments: N663.18 billion
  • Foreign VAT Payments: N435.73 billion
  • Import VAT: N332.01 billion

This quarterly surge is driven by significant growth in specific sectors. The accommodation and food service activities sector led the way with an impressive 59.15 per cent increase. This was followed closely by administrative and support services, which saw a 47.79 per cent rise.

Conversely, the activities of extraterritorial organisations and bodies experienced the steepest decline, falling by 57.01 per cent, with human health and social work activities also seeing a reduction of 27.73 per cent.

Sectoral Contributions to VAT Revenue

The manufacturing sector contributed the largest share, making up 26.72 per cent of the total VAT collected. This was followed by the information and communication sector at 17.42 per cent, and the mining and quarrying sector at 15.42 per cent.

At the lower end of the spectrum, activities of households as employers and the production of undifferentiated goods and services for their own use accounted for the smallest share at just 0.01 per cent. Extraterritorial organisations and bodies contributed 0.03 per cent, while water supply, sewerage, waste management, and remediation activities added 0.05 per cent.

Analysis: Drivers of VAT Growth and Sectoral Performance

The significant growth in VAT collections for Q1 2024 can be attributed to several factors:

  1. Economic Recovery and Expansion: Post-pandemic economic activities have picked up pace, leading to increased consumption and business transactions, which are directly reflected in VAT collections.
  2. Improved Tax Compliance and Administration: Enhanced efforts by the FIRS to improve tax compliance and administration have yielded positive results. The introduction of digital platforms for tax payment and more stringent enforcement measures have likely contributed to the higher collections.
  3. Sectoral Dynamics:
    • The accommodation and food services sector’s high growth rate suggests a strong rebound in the hospitality and tourism industry, likely driven by increased domestic travel and tourism activities.
    • Administrative and support services growth indicates increased outsourcing and business services activities, reflecting a broader economic upturn.

Challenges and Declines

While the overall picture is positive, certain sectors have underperformed:

  • Extraterritorial Organisations and Bodies: The significant decline in this sector could be due to reduced international activities or funding cuts.
  • Human Health and Social Work Activities: The drop in VAT contribution from this sector may reflect ongoing challenges in the healthcare sector, possibly linked to funding or reduced service uptake post-pandemic.

Sectoral Contributions and Economic Implications

  • Manufacturing: As the largest contributor to VAT, the manufacturing sector’s performance is critical for sustained revenue growth. Continued support for industrial activities, including incentives and infrastructure development, will be essential.
  • Information and Communication: The robust contribution from this sector underscores the importance of the digital economy. Policies fostering innovation and technological advancement will further enhance its role.
  • Mining and Quarrying: This sector’s significant share highlights the ongoing importance of Nigeria’s natural resources. Sustainable practices and investment in this sector will ensure long-term benefits.

The impressive growth in VAT collections in Q1 2024 reflects a recovering and expanding economy, improved tax administration, and sectoral dynamism.

Also read: Air travel costs up by 19%, intercity bus fares skyrocket by 78% year-on-year – NBS

Continued focus on enhancing tax compliance, supporting key economic sectors, and addressing the challenges in underperforming areas will be crucial for maintaining this growth trajectory.

The NBS and FIRS’s efforts have clearly paid off, but maintaining this momentum will require sustained policy support and adaptive strategies to navigate the complex economic landscape.

Samuel Bolaji

Samuel Bolaji holds a Master of Letters in Publishing Studies from the University of Stirling, Scotland, United Kingdom, and a Bachelor of Arts in English from the University of Lagos, Nigeria. He is an experienced researcher, multimedia journalist, writer, and Editor. He is currently the Editor of Arbiterz.

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