In a landmark move aimed at overhauling Nigeria’s outdated and complex tax system, President Bola Ahmed Tinubu has signed into law four comprehensive finance bills that introduce sweeping reforms to promote fairness, efficiency, and transparency in revenue collection across all levels of government. The reforms are expected to significantly boost Nigeria’s tax-to-GDP ratio, improve the ease of doing business, and provide meaningful tax relief to low-income earners and small businesses.
The announcement comes as Nigeria grapples with the need to increase domestic revenue without deepening poverty or overburdening the already strained informal sector. With Africa’s largest population and one of the lowest tax-to-GDP ratios on the continent, hovering just above 10% compared to the regional average of 16–18% Nigeria has long faced criticism for relying heavily on oil revenues and borrowing, while extracting too little in taxes to support development.
President Tinubu signed the reforms on the second anniversary of his administration, highlighting his government’s commitment to making life easier for ordinary Nigerians while fostering economic resilience. “These tax reforms will protect low-income households and support workers by expanding their disposable income,” Tinubu stated. “They will also simplify revenue collection and create a system that promotes voluntary compliance and accountability.”
Details of the Four Finance Laws
- Nigeria Tax Act: This consolidates over 50 small, overlapping taxes into a unified code, eliminating duplication and bureaucratic bottlenecks that have long discouraged businesses from complying. It is expected to reduce harassment by revenue officials and help micro, small, and medium enterprises (MSMEs) thrive.
- Tax Administration Act: Establishes uniform procedures for tax collection across federal, state, and local governments. This measure aims to streamline processes and reduce confusion and inefficiencies caused by conflicting regulations.
- Nigeria Revenue Service Act (NRS Act): Replaces the Federal Inland Revenue Service (FIRS) with an independent Nigeria Revenue Service, designed to operate more professionally, independently, and efficiently in tax collection.
- Joint Revenue Board Act: Enhances coordination between different levels of government, while establishing a Tax Ombudsman and Tax Appeal Tribunal to resolve disputes transparently and fairly. This is expected to rebuild trust among taxpayers who often complain about arbitrary assessments and harassment.
Who Benefits?
The new tax laws provide substantial relief for low-income earners, informal traders, and small businesses. Individuals earning less than ₦1 million ($650) annually will receive a ₦200,000 ($130) rent relief deduction—meaning their taxable income will drop to ₦800,000 ($520), effectively eliminating their income tax liability.
In addition, Value Added Tax (VAT) will no longer apply to essential items like food, healthcare, baby products, rent, power, and education, potentially lowering living costs for millions of families.
Small businesses with turnover below ₦50 million ($32,400) will be exempt from company income tax and will enjoy simplified filing requirements—no audited accounts needed. Meanwhile, large corporations will benefit from a gradual reduction in company income tax rates—from 30% currently to 27.5% in 2025 and 25% by 2027. They will also be allowed to claim VAT credits for business expenses and capital investments, improving liquidity and investment potential.
Charitable organizations, religious bodies, educational institutions, and cooperatives will also enjoy new incentives—provided they don’t derive revenue from commercial ventures.
Winners and Losers
While low-income earners and SMEs stand to benefit the most, the reforms also impose tighter tax rules for high-income individuals and luxury consumers. Capital gains taxes will now apply to large share disposals, and luxury goods will attract higher VAT rates. This aligns with Tinubu’s pledge to make the rich pay more without placing further strain on the poor.
Challenges and Reactions
Although the policy direction has been widely praised, execution remains a concern. Economist Emmanuel Idenyi warned that overzealous or corrupt enforcement could defeat the reform’s purpose. “Even with new rules, if tax officers have unrealistic targets, they may inflate assessments or harass businesses. That’s where the challenge lies,” he said.
Chidinma, a small business owner in Lagos, echoed this concern: “I’m happy we don’t have to pay company tax, but what if they introduce another strange levy next month? It happens all the time.”
Nonetheless, optimism is growing. Presidential Tax Reform Committee chair Taiwo Oyedele revealed that 90% of Nigerians back the new laws, but emphasized that success depends on widespread public awareness and institutional trust. “We need to educate the people so they understand their rights and responsibilities. If people don’t trust the system, they won’t comply.”
Outlook
If implemented effectively, the tax reform could become one of Tinubu’s signature achievements—reducing Nigeria’s reliance on oil, unlocking new revenue for infrastructure, health, and education, and positioning the country as a model for tax reform in Africa.
By making tax laws fairer, simpler, and more enforceable, the administration hopes to create an environment where formal businesses can grow, public services can be funded sustainably, and citizens can prosper without fear of financial repression.
The muted reaction from opposition parties and unions reflects cautious optimism. As Nigeria prepares for the next fiscal cycle, the success of the reform will be judged not by the lawbooks, but by real change in the lives of ordinary Nigerians.
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