President Bola Tinubu has signed into law four significant tax reform bills aimed at simplifying Nigeria’s tax system, promoting fairness, and boosting government revenue without increasing the burden on vulnerable citizens.
The move comes as part of the administration’s broader plan to raise Nigeria’s tax-to-GDP ratio from 10% to 18% by 2026, aligning with the African average.
✅ Key Highlights of Nigeria’s New Tax Laws
- VAT Remains at 7.5%, But Expanded Scope
Essential goods and services like food, healthcare, education, public transport, residential rent, electricity, and exports are zero-rated, meaning they attract 0% VAT.
VAT revenue distribution has been revised to benefit state governments more equitably:
- 30% based on consumption,
- 50% shared equally among all states,
- 20% based on population.
📜 Overview of the Four New Tax Laws
- Nigeria Tax Act
Consolidates over 50 small taxes into a single code to reduce duplication and complexity.
Ease compliance for small businesses and informal traders.
- Tax Administration Act
Creates uniform tax collection rules across federal, state, and local levels.
Reduces conflicts between revenue agencies.
- Nigeria Revenue Service Act
Replaces FIRS with a new independent Nigeria Revenue Service for improved efficiency and autonomy.
- Joint Revenue Board Act
Introduces the Tax Ombudsman and the Tax Appeal Tribunal to resolve disputes.
Enhances coordination between all tiers of government.
🎯 Objectives of the New Tax Reforms
Simplify the Tax System to encourage voluntary compliance.
- Increase Efficiency by modernizing tax administration.
- Reduce the Financial Burden on low-income earners and small businesses.
- Raise Revenue for critical public services (healthcare, education, infrastructure).
💡 Who Benefits and How
👨👩👧👦 Low-Income Households
- Income tax exemption for those earning up to ₦1 million annually.
- ₦200,000 rent relief makes the effective taxable income ₦800,000.
- Lower cost of living due to zero VAT on basic needs.
🧾 Small Businesses
- Annual revenue below ₦50 million is exempt from Company Income Tax (CIT).
- Simplified filing; audited financial statements not required.
🏢 Large Companies
- Corporate tax rate reduced from 30% to 27.5% (2025) and 25% thereafter.
- Can now claim tax credits on VAT paid for operational costs and asset purchases.
🕍 NGOs, Churches, Schools
Tax incentives on non-commercial income to encourage community services.
⚖ Impact Across Stakeholders
- Low-Income Earners: Tax relief increases purchasing power.
- Small Businesses: Encourages growth, reduces penalties for informality.
- High-Income Earners: Higher tax burden through luxury VAT and capital gains tax on large asset sales.
- Government: Gains more revenue without overburdening the poor or small enterprises.
❓ Why Were Reforms Necessary?
- Nigeria’s tax system was overly complex and outdated.
- The country’s low tax-to-GDP ratio hindered sustainable development.
- Multiple, overlapping taxes discouraged compliance, especially among MSMEs.
🗣 Public Reactions and Expert Views
Positive Response from small businesses and low-income earners.
Concerns remain about implementation, transparency, and awareness.
Taiwo Oyedele, head of the Presidential Tax Reform Committee, reported 90% public support, calling it a people-focused reform.
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📌 Conclusion: A New Era for Nigeria’s Tax System
These reforms signal a bold move towards fairness, economic growth, and reduced dependence on borrowing. They aim to create a transparent, efficient, and inclusive tax system that strengthens Nigeria’s fiscal foundation.
For detailed breakdowns, visit official FG statements, the Presidential Tax Committee’s website, or trusted national dailies.
Stay with NaijaBlogDaily for updates on Nigeria’s economic reforms, government policies, and tax developments.
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