By Daniel Edu
Taxes on various products within the country have surged to N1.36 trillion during the first half of 2023, despite prevailing economic challenges.
This reflects a significant increase of 113.29% compared to the N636.19 billion reported during the first half of 2021, and a 25.00% increase from the N1.09 trillion recorded during the same period in 2022. These figures are derived from National Bureau of Statistics (NBS) data on Net Indirect Taxes on Products, calculated at current basic prices.
When adjusted for inflation, product taxes amounted to N465.94 billion in the first half of 2023, marking a 34.98% increase from the N345.19 billion reported during the same period in 2021, and an 11.94% increase from the N416.23 billion reported in the corresponding period of 2022.
Net indirect taxes, according to the World Bank, encompass product taxes minus subsidies. Product taxes comprise taxes payable by producers relating to the production, sale, purchase, or utilization of goods and services.
While Nigeria’s Gross Domestic Product (GDP) experienced a 2.51% growth in real terms during the second quarter of 2023, this figure was lower than the 3.54% growth recorded in the same period of 2022. The NBS suggested that challenging economic conditions may have contributed to this decrease.
Given the impact of the global economic downturn on revenue, the Federal Government has been intensifying its tax efforts. The government’s 2023-2035 Medium Term Expenditure Framework and Fiscal Strategy Paper outlines strategies to enhance revenue, including enhancing tax administration and introducing new or increased pro-health taxes, such as excise taxes on sugar-sweetened beverages, tobacco, and alcohol.
Despite falling purchasing power due to inflation reaching 22.79% in June, product taxes have continued to rise. The World Bank reported that high inflation has driven increased poverty, causing about four million Nigerians to fall into poverty between January and May 2023. Inflation is projected to further increase, potentially reaching 25% by 2023, according to the World Bank.
In addition, the International Monetary Fund (IMF) has recommended that Nigeria increase its Value Added Tax (VAT) rate to 15% by 2027. This move could potentially raise more revenue from product taxes, consequently influencing product prices.
