President Bola Tinubu’s administration has introduced a series of tax reform bills aimed at simplifying Nigeria’s tax system, easing the financial burden on low-income earners and small businesses, and promoting economic growth.
The reform package includes four primary bills: the Joint Revenue Board of Nigeria (Establishment) Bill, 2024, the Nigeria Revenue Service (Establishment) Bill, 2024, the Nigeria Tax Administration Bill, 2024, and the Nigeria Tax Bill, 2024.
One key feature of the reform is the progressive reduction in personal income tax rates. Individuals earning below ₦800,000 annually are exempt from paying income tax, which benefits over 70% of Nigerians who fall into this income bracket.
For small businesses, the reforms propose exempting companies with annual turnovers of ₦50 million or less from paying taxes. Additionally, company income tax is set to decrease from 30% to 25% by 2026.
The reforms aim to streamline and unify various levies, such as the education tax and NASENI tax, into a single development levy. They also propose a new revenue-sharing formula for VAT, allocating 55% to state governments and 10% to the federal government. A significant portion of the tax revenue will support social initiatives, such as the federal government’s student loan scheme, to enhance educational access.
The bills also recommend amendments or repeals to existing laws, including parts of the Petroleum Industry Act and the Nigerian Export Processing Zones Act, among others. Despite criticisms suggesting these reforms may lead to higher taxes, proponents argue that they are pro-poor and business-friendly, aimed at reducing the tax burden for Nigeria’s working class and small enterprises.
These reforms are currently under legislative review and may face amendments before being enacted.
