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Tinubu, Bola

Nigeria's President Tinubu Signs Landmark Tax Reform Bills into Law

Strategic Insights

— 2 min read

Nigeria's President Bola Ahmed Tinubu has signed four transformative tax bills into law, marking a significant step towards simplifying tax structures, reducing compliance costs, and broadening the country's tax net. The reforms are designed to ease the cost of doing business, reduce the burden on low-income households, and support workers by expanding their disposable income. The new laws aim to create a 21st-century tax system capable of supporting Nigeria's $1 trillion GDP target. The President's fiscal modernization drive is aimed at repositioning Nigeria as a more competitive economy and reducing its overdependence on oil revenues and foreign debt.

Key Takeaways:

  • The four new tax laws aim to consolidate tax laws, simplify tax collection, and enhance transparency and accountability in tax administration.
  • The Nigeria Tax Act consolidates over 50 fragmented and overlapping taxes into a single, simplified code, aiming to remove confusion, duplication, and hidden levies that discourage small business growth.
  • The Tax Administration Act establishes uniform rules for tax collection across federal, state, and local tiers, aiming to reduce contradictions and enhance compliance.
  • The Nigeria Revenue Service (NRS) Act dissolves the Federal Inland Revenue Service (FIRS), establishing a new, autonomous NRS empowered to collect both tax and non-tax revenue on behalf of the government.
  • The Joint Revenue Board Act establishes a Joint Revenue Board for collaboration among tax authorities, creating a Tax Appeal Tribunal and a Tax Ombudsman to ensure fair treatment for taxpayers and speedy resolution of tax disputes.
  • The reforms are designed to ease the cost of doing business, reduce the burden on low-income households, and support workers by expanding their disposable income.
  • Businesses earning below $32,400 per year are now exempt from Company Income Tax (CIT), removing entry barriers to the formal economy for informal businesses.
  • The CIT rate for Large Corporations is reduced from 30% to 25% in later years, boosting investment potential and reinvestment into the economy.
  • Tax exemptions are now extended to non-profit cooperatives, faith-based organizations, and educational trusts, provided that their earnings do not come from commercial or for-profit activities.
  • The government aims to raise the tax-to-GDP ratio to 18% by 2026, focusing on simplifying tax rules, encouraging voluntary compliance, and expanding the tax base.

Statistics:

  • The tax-to-GDP ratio in Nigeria is around 10.8%, significantly lower than the African average of 16-18%.
  • The government aims to raise the tax-to-GDP ratio to 18% by 2026.
  • Nigeria's GDP target is $1 trillion.
  • The new laws aim to simplify tax collection, enhance transparency and accountability, and reduce compliance costs.

Sources:

  • Presidency of Nigeria
  • Bola Ahmed Tinubu, President of Nigeria
  • Nigeria Revenue Service (NRS)
  • Joint Revenue Board Act
  • Tax Administration Act
  • Nigeria Tax Act
  • Federal Inland Revenue Service (FIRS)

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