Tony Chukwunyem 
Banks, insurance companies and other financial institutions in the country collected the total sum of N148.18 billion as Value Added Tax (VAT) in the first six months of the year, findings by New Telegraph show.
The amount is 59.90 per cent or N55.51 billion higher than the N92.67 billion that the sector collected as VAT in the corresponding period of 2023.
According to the “Sectoral Distribution of Value Added Tax (Q2 2024)” report recently released by the National Bureau of Statistics (NBS), of the total sum of N792.58 billion generated by the Federal Inland Revenue Service (FIRS) as non-import VAT between April and June this year, financial and insurance services contributed the sum of N82.55 billion compared to the N65.62 billion that the sector contributed in the previous quarter, indicating a 26 per cent quarter-over-quarter increase.
Indeed, an analysis of data obtained from the NBS indicates a steady increase in VAT collected by banks and other financial institutions between 2020 and 2023 compared to earlier years.
Specifically, the data shows that VAT sectoral collection for financial and insurance activities stood at N24.77 billion in 2020, N67.91 billion in 2021, N109.3 billion in 2022 and N215.8 billion in 2023.
All banks and financial institutions- except those granted exemption- are required by the VAT Act to charge VAT on services rendered by them to their customers and account for the same to the FIRS.
Analysts attribute the significant increase in VAT collections by financial institutions in the last four years to the Federal Government’s raising of the VAT rate from 5 percent to 7.5 per cent in February 2020 and the expansion of digital financial services.
In addition, analysts believe that various initiatives introduced by the Federal Government in recent years, in its bid to generate more revenue from non-oil sources, contributed to the sharp increase in VAT collection in recent years.
For instance, New Telegraph reports that in November 2022, the FIRS announced that Deposit Money Banks (DMBs) as well as Telco giants, MTN and Airtel, have been appointed to withhold VAT charged on all taxable supplies made to them, stating that the new policy would take effect from January 1, 2023.
