In a sweeping overhaul of its tax framework, Nigeria has enacted four new finance laws aimed at modernizing revenue collection, easing compliance for small businesses, and providing relief for low-income households. The reforms, signed into law by President Bola Tinubu, mark a significant step in restructuring the country’s taxation system to make it simpler, fairer, and more growth-oriented.
A Unified and Simplified Tax Regime
The newly signed laws represent a strategic attempt to streamline Nigeria’s complex tax architecture. Central to the reform is the Nigeria Tax Act, which consolidates over 50 scattered and overlapping taxes into a single code. This consolidation is expected to reduce duplication and make it easier for individuals and businesses to understand and comply with tax obligations.
Other key laws include:
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The Tax Administration Act, which introduces uniform tax collection procedures across all tiers of government.
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The Nigeria Revenue Service Act, replacing the Federal Inland Revenue Service with a more autonomous and restructured Nigeria Revenue Service (NRS).
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The Joint Revenue Board Act, which aims to foster collaboration across federal, state, and local tax authorities while also introducing mechanisms for dispute resolution through a Tax Ombudsman and Appeal Tribunal.
These reforms, according to government sources, are designed to remove bureaucratic bottlenecks, improve tax compliance, and generate sustainable revenue without overburdening citizens.
Relief Measures for Households and Small Businesses
One of the most notable aspects of the reform is its focus on supporting vulnerable and low-income groups. Individuals earning up to ₦1 million annually will receive a ₦200,000 rent relief deduction, effectively making their taxable income ₦800,000—low enough to exempt them from paying income tax.
Essential goods and services such as food, health care, rent, electricity, education, and baby products are now exempt from Value Added Tax (VAT), significantly easing the financial pressure on everyday families.
Small businesses with annual revenues below ₦50 million will be exempt from company income tax and permitted to file simplified financial statements without the need for audited accounts. These adjustments are aimed at encouraging informal enterprises to formalize and contribute to the tax base without facing immediate regulatory burdens.
Corporate Incentives and Fiscal Adjustments
Larger businesses will benefit from a gradual reduction in corporate income tax rates—from the current 30% to 27.5% in 2025, and then 25% in subsequent years. In addition, companies can now claim VAT credits on qualifying expenses and assets, improving cash flow and reducing the tax cost of business expansion.
Tax incentives have also been extended to non-commercial entities such as non-profits, religious institutions, cooperatives, and educational bodies—provided their income is not generated from commercial operations.
However, high-income earners and consumers of luxury goods may face increased taxes, including higher VAT on premium products and a capital gains tax on substantial share sales.
Rebuilding Trust and Boosting Compliance
The reforms come in response to long-standing criticism that Nigeria’s tax system is outdated, opaque, and regressive. With a tax-to-GDP ratio of just over 10%—far below the African average of 16–18%—the government is targeting an 18% ratio by 2026. Officials stress that this increase will not come through higher taxes, but through improved compliance, reduced evasion, and simplified rules.
By eliminating barriers and boosting voluntary compliance, the administration hopes to secure more stable funding for essential public services like healthcare, education, and infrastructure—reducing the country’s reliance on external borrowing.
Mixed Reactions on Implementation
The reforms have been cautiously welcomed by business owners and analysts. While many applaud the exemptions and simplification measures, concerns remain about enforcement and the possibility of conflicting local levies.
“I appreciate the removal of company income tax for small businesses, but I’m concerned about new levies that may come up,” said one Lagos-based entrepreneur.
Experts caution that for the reforms to succeed, tax authorities must change their approach. Heavy-handed enforcement or arbitrary assessments could undermine the goodwill these reforms are designed to foster.
“The intent is right,” noted one economist, “but implementation is everything. If revenue officers continue to prioritize quotas over fairness, many small businesses will still be discouraged.”
A Cautious Path Forward
Government officials remain optimistic, pointing to widespread public support for the changes. According to the chairman of the Presidential Fiscal Policy and Tax Reform Committee, around 90% of Nigerians support the new finance laws. However, he emphasized that trust, public awareness, and institutional transparency will be crucial to their success.
While political opposition has remained relatively silent, the next challenge lies in turning legislative progress into practical benefits for citizens and businesses alike.
