October 03, (THEWILL) — The Presidential Fiscal Policy and Tax Reforms Committee, on Friday, October 3, engaged journalists, influencers, and public analysts in an interactive session to clarify some misconceptions surrounding Nigeria’s newly enacted tax reform laws.
Speaking at the session, the Committee’s Chairman, Taiwo Oyedele, stated that while it is not unusual for tax reforms to be misunderstood anywhere in the world, deliberate misreporting and uninformed analyses are harmful to our collective interest, given that the reforms are designed to benefit ordinary Nigerians, secure long-term economic stability and inclusive growth for the country.
“The objectives of the reforms have been clear from the very beginning – reduce the tax burden on the masses, harmonise and simplify tax rules to address multiplicity of taxes, promote a modern, business-friendly and globally competitive tax system. Our approach is people-centric, growth-focused, and efficiency-driven”, Mr Oyedele said.
Key Highlights of the New Tax Reform Laws:
Personal Income Tax: Low-income earners, including those earning the national minimum wage, are exempt from tax. The average income earners will pay less tax, while high-income earners (about the top 3% of the population) will contribute progressively more, up to 25% of their income.
This is a much lower rate than the top rates in countries such as Ghana & Kenya at 35% and South Africa at 45%.
Value Added Tax (VAT): Businesses will enjoy broader input credits on their assets and overhead to lower costs. Basic items such as food, education and health services are taxed at 0%, while rent and transportation are exempt. These measures are expected to result in lower prices for consumers. In addition, small businesses are exempt from charging VAT, ensuring that they are not overburdened with excessive tax obligations.
Tax Identification (Tax ID): The provision of “Tax ID” is only mandatory for opening and operating a bank account intended for income-generating or business purposes. The “Tax ID” is not a new ID card but a system that builds on and harmonises the existing Tax Identification Numbers (TIN) for ease of economic activities. The requirement to provide a TIN for operating a business account was introduced by the 2020 Finance Act and has been implemented since January 13, 2020.
While banks are required to report quarterly transactions above a certain threshold under the new tax laws, it is not true that inflows into bank accounts will be automatically taxed.
Informal Sector: The new tax laws offer major tax reliefs to small businesses. The new tax structure is designed to encourage formalisation by exempting small companies with an annual turnover of N100m or less from corporate income tax.
In addition, these small businesses are exempt from charging VAT or accounting for withholding tax on their transactions. The goal is to reduce the burden on nano, micro and small businesses which constitute the largest share of employment and GDP.
Tax Harmonisation: There is an ongoing process to reduce over 60 different taxes and levies to fewer than 10, easing compliance and curbing the proliferation of multiple charges. Contrary to the misconception about imposing a higher tax burden or introducing new taxes, the current administration is reducing both the number of taxes and the burden on citizens and businesses.
Some taxes which were introduced by the previous administrations have, in fact, been reversed or suspended, including the 5% levy on airtime and data, the cybersecurity levy on bank transfers, the carbon tax on single-use plastics, excise tax on vehicles and so on.
No imposition of tax on individuals not previously taxable: The new tax laws did not introduce taxes on individuals who were not previously taxable.
Online content creators, influencers, income from virtual assets, and other income-generating activities have always been subject to tax under the old Personal Income Tax Act. The new tax laws only provide clarity and ensure fairness by allowing deductions for losses where applicable. Income earned by way of growth rather than as a payment for a transaction is not taxable.
The ongoing tax reform is raising public awareness, which sometimes leads to the wrong impression that a requirement is new.
The Committee stressed that the reforms are aimed at fairness, efficiency, and simplicity – ensuring that the tax system supports investment, job creation, and sustainable growth.
The Committee clarified that:
The poor are not being taxed under the new laws, and the average citizen will pay less, not more taxes.
Businesses will save costs through harmonisation, enhanced input credits, faster tax refunds, lower withholding tax rates, and a planned reduction in the corporate tax rate.
Small companies are exempt from corporate income tax, charging of VAT on their transactions and withholding tax. The informal sector will benefit from incentives to join the formal economy rather than being penalised, thereby enhancing their opportunity for growth.
These reforms are not about raising taxes arbitrarily, but about making the system simpler, fairer, pro-people and pro-growth. The measures designed to curb tax evasion are necessary to provide a level playing field for honest and patriotic taxpayers.
Mr Oyedele called on Nigerians to seek credible information and engage constructively. “These reforms are designed to benefit all Nigerians. Let us work together to ensure effective implementation and position ourselves for the better days ahead of us”, he said.
Next Steps: The Committee assured stakeholders of working with relevant implementing agencies for a robust and transparent implementation process, with continuous engagement to seek feedback, address concerns and ensure a smooth transition.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
