In the latest bid to reform Nigeria’s complex and burdensome tax system, President Bola Ahmed Tinubu has introduced sweeping changes designed to alleviate the financial pressures on citizens and stimulate economic growth. While the intent may be noble, the question on the lips of many Nigerians is: “Why? What is our offense?”
The proposed tax reforms, encapsulated in a new bill, promise to reshape the country’s taxation framework. Highlights of these reforms include exempting businesses with less than N50 million turnover from paying taxes and scrapping over 50 nuisance taxes that have strangled local businesses for years. Over 90% of small businesses, which form the backbone of the Nigerian economy, will no longer pay profit taxes, offering significant relief.
For individual taxpayers, the reforms aim to ease the burden on low- and middle-income earners. Workers earning less than N1.7 million monthly will pay less income tax, while those receiving less than N9 million annually could see their tax cut by half.
Furthermore, over 82% of goods consumed by low-income Nigerians will now be VAT-free, ensuring that essential items remain affordable for the majority.
Perhaps the most radical proposal is the gradual shift in VAT rates, starting from 10% in 2025 and increasing to 15% by 2030. While this seems like a burden, the focus on exempting low-income goods from VAT offers some consolation. Additionally, the VAT collection mechanism will shift from being based on company headquarters to where goods are consumed, ensuring fairer revenue distribution to states and local governments.
The federal government’s share of VAT revenue is also set to drop from 15% to 10%, giving states and local governments a combined 90% share. This decentralization aims to empower subnational entities to better manage their resources and fund local projects. However, questions remain about the capacity of states and LGAs to handle this newfound financial autonomy responsibly.
Another critical aspect of the reforms is the consolidation of tax collection. Agencies like Customs and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will no longer collect taxes independently. Instead, a single agency will oversee all tax collection, reducing inefficiency and corruption.
While these measures appear progressive, they also raise concerns. The elimination of consumption taxes collected by states and the potential abolition of other tax laws like the Stamp Duty Act could lead to revenue shortfalls in the short term. Additionally, the gradual VAT increase, despite its exemptions, may still disproportionately affect middle-income earners who already struggle under the weight of inflation.
Most concerning for critics is the proposal that the rich will pay more taxes, while the poor stop paying entirely. While this might seem fair, it risks disincentivizing investments from high-net-worth individuals and corporations who might seek friendlier tax regimes elsewhere.
Tinubu’s reforms attempt to address decades of systemic flaws in Nigeria’s tax system. However, as Nigerians grapple with economic uncertainty, one wonders: is the timing right? Will these changes bring relief, or are they a prelude to another chapter of hardship? As the reforms unfold, citizens watch with a mixture of hope and apprehension, waiting to see if these promises will translate into tangible benefits.
Hon IG Amaechi Okoro
Head: media Directorate COPDEM Delta State
