Seven banks paid N392.53bn as tax in the first half of 2024, according to an analysis of their second-quarter financial reports for the period ended June 30 filed with the Nigeria Exchange.
The banks’ tax expenses included various levies, such as corporate tax, minimum tax, information technology tax, tertiary education tax, Police Trust Fund levy, among others.
The Federal Inland Revenue Service stated that the Company Income Tax is a 30 per cent tax imposed on companies’ profits, while the value-added tax is a 7.5 per cent consumption tax borne by the final consumer during purchases.
Guaranty Trust Holdings emerged as the highest contributor, reporting an income tax expense of N110.90bn for the first half of the year, a 292.5 per cent increase from N28.17bn in H1 2023.
The United Bank for Africa followed with a tax expense of N85.22bn, a 235.5 per cent rise from N25.41bn in the previous year.
Access Bank tax expenses rose by 215.4 per cent to N80.89bn compared to N25.64bn in H1 2023. Meanwhile, Zenith Bank reported a tax expense of N59.59bn, up 90.0 per cent from N31.32bn in the same period last year.
Wema Bank recorded a tax expense of N3.97bn, up 48.1 per cent from N7.38bn in the previous year, while Fidelity Bank reported N44.03bn, reflecting a 232.0 per cent increase from N13.23bn in H1 2023.
However, First City Monument Bank’s tax obligation declined by 29.0 per cent to N7.93bn from N11.30bn in H1 2023.
The Chief Economist and Managing Editor of Proshare, Teslim Shitta-Bey, highlighted the balance between profits and dividends.
He explained that although increased taxes do not directly affect bank operations, they influence shareholder dividends and retain earnings, which are vital for future investments.
He said: “When analysing the profit before tax of banks, it is important to note that the increased tax is not necessarily going to affect their operations directly. However, it does have implications for shareholders.
“If a bank generates significant profits, the chief beneficiaries are the investors, as they receive dividends.
The portion of the profits that is not used for dividends is reinvested into the bank’s operational expenses, such as lending or improving technology.”
Another financial expert, Rotimi Fakeyejo, referred to the banks’ gains as “unusual profit” compared to other sectors suffering losses due to foreign exchange challenges. He mentioned that the government was using that opportunity to increase taxes on banks, a move that had not diminished dividend payouts or shareholder returns.
He expounded, “They call it ‘unusual profit’ because, aside from banks, many other sectors have suffered losses due to foreign exchange losses. That is part of the reason the government decided to increase taxes on banks.
“If you examine the performance of banks this year, you will see that they experienced a significant leap compared to last year.”
Also, a financial analyst, Olaid Baanu, shared a more optimistic outlook, suggesting that the tax burden would not drastically affect banks.
He explained that banks’ continued profitability means that they could absorb increased taxes while maintaining strong financial performance.
He said: “The increased tax burden won’t affect the banks that much because many of them have reported substantial profits. Given their strong financial performance, I don’t think the tax will significantly impact them. It is a good source of income for the government.”
The PUNCH reports that multinational companies, such as Google, Netflix, and Facebook, paid N2.55tn in taxes to the Federal Government in the first six months of this year.
