23 Game-Changing Facts About Tinubu’s Tax Reforms That Could Transform Nigeria
The proposed tax reform bills from President Bola Ahmed Tinubu have sparked intense discussions across Nigeria. While opinions vary between critics and supporters, many are still unaware of the significant changes these reforms are set to bring. From reducing tax burdens for small businesses to easing the load on low-income earners, here’s a clear breakdown of the reforms—explained simply.
Recently, President Tinubu presented four major tax-related bills to the National Assembly. These include:
Nigeria Tax Bill
Nigeria Tax Administration Bill
Nigeria Revenue Service Establishment Bill
Joint Revenue Board Establishment Bill
While the goal of these bills is to update Nigeria’s outdated tax laws, they have also stirred some controversy, particularly regarding revenue sharing between states and the federal government. However, there’s good news: the reforms aim to directly benefit ordinary Nigerians, with a focus on the poor and small businesses. Below are 23 things you might not know about Tinubu’s tax reforms:
1. Income Tax Relief for Low-Income Earners
If you earn ₦800,000 or less annually, you’ll no longer pay income tax, saving about ₦84,000 each year.
2. Higher Threshold for Top Income Tax Rates
Those earning over ₦50 million annually will face a 25% tax rate, a significant increase from the current ₦3.2 million threshold.
3. Tax Exemptions for Small Businesses
Businesses with annual turnovers under ₦50 million will be exempt from paying income tax, up from the current ₦25 million limit.
4. Corporate Tax Cuts
By 2026, medium and large companies will see a reduction in corporate tax rates from 30% to 25%.
5. End of the ‘Minimum Tax’
Companies that do not report profits will no longer be forced to pay a mandatory 1% tax on their gross earnings.
6. Lower Taxes for Large Corporations
A new 2% development levy will replace the previous 3.75% surcharge, with the funds earmarked to support student loans from 2030 onwards.
7. Changes to VAT Allocation
States will now receive 55% of VAT revenue, up from 50%, while the federal government’s share will drop from 15% to 10%.
8. Gradual VAT Increase
The VAT rate will increase from the current 7.5% to 15% by 2030. However, essential goods like food and medicine will remain VAT-free.
9. Lower Cost of Living for the Poor
Basic necessities such as food, electricity, school fees, and healthcare will remain exempt from VAT, helping to keep costs affordable.
10. Tax Breaks for Gas Investment
The reforms include tax incentives for both associated and non-associated gas projects, aimed at boosting Nigeria’s energy supply.
Transforming Tax Administration
The Nigeria Tax Administration Bill introduces several measures to improve compliance and fairness:
11. Targeting Tax Evaders
Individuals spending over ₦25 million a month and businesses spending over ₦100 million a month will be flagged for tax audits through their bank records.
12. Flexibility in Tax Payments
Taxes assessed in foreign currencies can now be paid in Naira at official exchange rates.
13. Streamlining Tax Collection
The Nigeria Revenue Service (NRS) will take over the collection of taxes from other agencies like Customs, allowing regulators to focus on oversight.
14. Ensuring Prompt Tax Refunds
Verified tax refunds will be deducted from collections to ensure they are paid out promptly.
Empowering Local Governments and Simplifying Tax Systems
The Joint Revenue Board Establishment Bill aims to make tax systems more efficient and transparent:
15. Local Tax Management
Local Government Areas (LGAs) will now handle taxes, fines, and rates within their areas to improve efficiency.
16. Uniform Penalties Across the Country
Penalties for tax offenses will now be standardized nationwide to improve compliance.
17. Simplified Dispute Resolution
A Tax Appeal Tribunal will be set up to resolve disputes, including disagreements over tax residency status.
18. Taxpayer Protection
A Tax Ombudsman Office will be created to ensure that citizens have recourse if they believe they’ve been treated unfairly by tax authorities.
Why This Matters
Supporters of Tinubu’s reforms believe they are designed to promote growth, fairness, and efficiency. By providing exemptions for low-income individuals and small businesses, and encouraging local economic activities, these reforms aim to reduce Nigeria’s dependency on oil revenue and create a more inclusive and fair tax system.
What’s Next?
The bills have already passed their Second Reading in the Senate and are now awaiting public hearings. While debate continues, experts agree that, if implemented effectively, these reforms could significantly improve Nigeria’s tax system and benefit millions of citizens.
