Banks, insurance companies and other financial institutions in the country collected a total sum of N223.69 billion as Value Added Tax (VAT) in the first nine months of the year, findings by New Telegraph show.

The amount is 42.53 per cent or N66.75 billion higher than the N156.94 billion that the sector collected as VAT in the corresponding period of 2023.

According to the “Sectoral Distribution of Value Added Tax (Q3’ 2024)” report released by the National Bureau of Statistics (NBS), of the total sum of N922.87 billion generated by the Federal Inland Revenue Service (FIRS) as non-import VAT between July and September this year, financial and insurance services contributed the sum of N75.51 billion compared to the N82.55 billion that the sector contributed in the previous quarter, indicating an 8.53 per cent quarter-over-quarter decline.

The report said: “On the aggregate, Value Added Tax (VAT) for Q3 2024 was reported at N1.78 trillion, showing a growth rate of 14.16 per cent on a quarter-on-quarter basis from N1.56 trillion in Q2’24.

Local payments recorded were N922.87 billion, Foreign VAT Payments were N448.85 billion, while import VAT contributed N410.62 billion in Q3’24.

“On a quarter-on-quarter basis, Human health and social work activities recorded the highest growth rate with 250.39 per cent, followed by the activities of households as employers, undifferentiated goods- and services-pro ducing activities of households for own use with 102.09 per cent.

“On the other hand, Water supply, sewerage, waste management and remediation activities had the least growth rate with –41.92 per ceny, followed by Activities of extraterritorial organisations and bodies with –36.14 per cent.

“In terms of sectoral contributions, the top three largest shares in Q3 2024 were Manufacturing with 22.21 per cent; Information and Communication with 20.89 per cent; and Mining & Quarrying activities with 18.90 per cent.”

While at N75.51 billion, the contribution of financial and insurance services to total non-import VAT generated by the FIRS declined in Q3’24 compared with N82.55 billion in the previous quarter, it was higher than the N65.62 billion recorded for Q1’24. Indeed, data obtained from the NBS shows a steady rise in VAT collected by the sector in recent years.

Specifically, an analysis of the NBS data indicates 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 decision to raise the VAT rate from five per cent to 7.5 per cent in February 2020 and the expansion of digital financial services.

Analysts also believe that various initiatives introduced by the Federal Government in recent years, in its bid to generate more revenue from non-oil sources, have equally contributed to the sharp increase in VAT collection in recent years.

For instance, 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.