Experts laud President Tinubu’s tax laws amidst concerns over  implementation

   • “It’s the most progressive, revolutionary… – Prof. Adamu

Positive reactions have continued to follow the four tax laws recently passed by the National Assembly, and assented to by President Bola Tinubu, as marking a new chapter in the fiscal and economic prospect of the country. On 26 June 2025, President Bola Ahmed Tinubu signed the four (4) Tax Reform Bills into law.

These laws include the Nigeria Tax Act (NTA), The Nigeria Tax Administration Act (NTAA), The Nigeria Revenue Service Act (NRSA), and the Joint Revenue Board Act (JRBA), collectively referred to as “The Tax Acts.”

The Acts, according to experts, comprehensively overhauled the Nigerian tax landscape to drive economic growth, increase revenue generation, improve the business environment, and enhance effective tax administration across the different levels of government.

The Nigerian Tax Reform Acts for the very first time in decades increased exemption threshold for small companies. Small companies are now exempt from Companies Income Tax (CIT), Capital Gains Tax (CGT) and the newly introduced Development levy.

Taking Care of the Small/Poor

For clarity, small companies are companies with annual gross turnovers of N100 million (previously N25 million), and below and total fixed assets not exceeding N250 million. Increased Capital Gains Tax (CGT) rate, and increases the Capital Gains Tax rate from 10% to 30% for companies.

This  has effectively aligned the CGT and Companies Income Tax rate, and reduces any tax arbitrage that could have been unduly enjoyed in the classification between chargeable gains and trading income.

For individuals, capital gains will be taxed at the applicable income tax rate based on the progressive tax band of the individual.

CGT on Indirect transfer of shares shows The NTA introduces CGT on indirect transfers of shares in Nigerian companies so that where shares are disposed of in intermediary holding companies offshore, a Nigeria CGT is triggered (subject to treaty exemptions).

Also, the tax exemption threshold for the sale of shares in Nigerian companies has been increased to N150 million (from N 100 million) in any 12 consecutive months, provided that the gains do not exceed N10 million.

Professor Jubril Adamu, an economist, told Business Hallmark that “In the history of the country, Tinubu’s tax reform is the best, the most progressive, and revolutionary. You may criticize him on many fronts, but he got it right this time around.”

Adamu noted that despite misgivings and fears arising from some gapping holes, which some fear may derail the effectiveness and results expected,  the tax reform is the best, and too early to consider retooling some aspects.

Development Levy Innovation

Nigerian companies with the exception of small companies will pay a “Development Levy” at 4% of their assessable profits (i,e. tax profits before deducting tax, depreciation, and losses). The Development Levy consolidates the Tertiary Education Tax (TET), Information Technology Levy (IT), the National Agency for Science and Engineering Infrastructure (NASENI) levy and the Police Trust Fund (PTF) levy.

Nigerian companies, which are members of a multinational group with aggregate group turnover of E750 million and above or have an annual turnover of N50 billion and above, will now be subject to a minimum effective tax rate (ETR) of 15% of their “Net Income.” Net Income is defined as profits before tax excluding franked investment income and unrealized gains or losses, except for life insurance companies, where the definition of Net Income also excludes gross and investment income for policyholders.

The minimum effective tax rule does not apply to Free Zone companies on their exports out of Nigeria, provided that such companies are not part of multinational groups. The Nigerian parent company of a multinational group will have to pay a top up tax where its subsidiaries have paid taxes below the minimum 15% ETR.

Most Critical Provisions

A more progressive Personal Income Tax (PIT) regime – The NTA – changes the income brackets and applicable tax rates for each bracket. Individuals earning N800,000 or less per annum will now be exempt from tax on their income and gains, while higher income earners will be taxed at a higher rate up to 25%. The Act also increases the tax exemption threshold for compensation for loss of employment or injury from N10 million to N50 million.

The Acts replace the pioneer tax holiday incentive, with an “Economic Development Incentive” (or EDI). This incentive introduces a tax credit of 5% per annum for five years on qualifying capital expenditure purchased by eligible companies within five years effective from the production date.

If a company has unused tax credits or qualifying capital expenses, it can carry them forward for another five years. Any credits still unused after this timeline will expire.

Prior to now there had been varied interpretations due to a lack of proper definition of “residence”. With the definition extending to individuals with substantial economic and immediate family ties in a year of assessment, the law widens the tax net. Employment income will now be taxed in Nigeria only if the individual is resident in Nigeria or performs duties in Nigeria without paying tax in their country of residence.

The Acts introduce the Tax Ombuds office to liaise with the tax authorities on behalf of taxpayers, and serve as an independent arbiter to review and resolve complaints relating to taxes, levies, duties or similar regulatory charges.

Value Added Tax at zero rate on essential goods and services contained in The NTA, expands the list of zero-rated items to include essential goods and services, such as basic food items, medical and pharmaceutical products, educational books and materials, electricity generation and transmission services, medical equipment and services, tuition fees, exports (excluding oil and gas exports) etc.

The impact of this is that businesses selling these goods and services can recover their VAT costs, despite the zero rate, which was previously not possible by law.

The VAT rate of 7.5% has been retained. Nigeria now adopts globally recognized VAT principles that allow for the claim of input VAT on all purchases including services and fixed assets.

Businesses providing services, which were previously unable to claim input VAT can now do so, provided that the input VAT is directly related to their supplies that are also subject to VAT.

Nigeria has now codified VAT fiscal rules and mandatory e-invoicing for businesses operating in the country. This sets Nigeria apart as an early adopter of e-invoicing in Africa. Companies in Nigeria are now mandated to implement the fiscal system deployed by the tax authority for the collection of VAT.

Some experts fear that the audacious  objectives of the reforms could be  sabotaged by  deeply entrenched political structure, vested interests, and  coordinated moves to drive its failure.

Nigerian Factor Concern

Dr. Olufemi Omoyele, a tax expert and head of the Entrepreneurship Centre at Osun State University, told Business Hallmark that Tinubu’s ambition of raising the country’s tax-to-output ratio, widely believed to be  one of the lowest in the continent, to 18 percent in the life of the current Medium Term Expenditure Framework (MTEF),  morphing into a more progressive tax  arrangements, building a more supportive fiscal framework and streamlining collection should be applauded.

However, he pointed out some concerns  in the pieces of legislation,  which have the capacity to scuttle  the implementation and the ambitious goals, if some urgent realignment is not addressed.

He said the framers of the reforms may not have taken cognisance of  a critical part of the transition of the institutional frameworks, including capacity building, without which the country risks huge revenue losses.

Like Omoyele, some analysts are of the view that  the presidential assent should signals  another round of wide consultations, given that earlier debates on some of the thorny points and concerns were speedily  concluded without thoroughness and due diligence, which may constitutes  a ‘landmine’ to the execution.

Again, Omoyele pointed out the concerns over the overlapping mandates of revenue-collecting institutions, including the Nigerian Customs Service (NCS), the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), and the proposed tax behemoth – Nigeria Revenue Service (NRS) – which will succeed the Federal Inland Revenue Service (FIRS).

With the three agencies making close to N1 trillion in Cost of Revenue Collection (CORC) in 2024 and the collection now going to be handled by the NRS, who will take two percent as CORC,  analysts like Omoyele pointed out that the unfolding scenario could pose funding challenge to NUPRC and NCS .

In 2024, CORC by NUPRC was N279.6 billion against N114.8 billion in 2023. The Federal Account Allocation Committee (FAAC)   revealed  that as of November last year, the three agencies had retained a total of N924.73 billion as CORC, which experts had condemned for breeding corruption.

The Petroleum Industry Act (PIA) and other statutes have conflicting and unresolved provisions on revenue collection. Besides, there are pending litigations over the administration and collection of the value-added tax (VAT) collection between some state and federal governments.

Some analysts are pessimistic about how to untie the tangled institutional landscape, which could ignite turf wars  and legal disputes undermining the effective implementation of the tax reforms.

There’s also apprehension  surrounding the impact on states, given that personal income tax is their primary source of internally generated revenue. With limited numbers of high-income earners in most states, stakeholders fear the new tax regime could shrink state-level revenues and widen fiscal gaps, particularly where exemptions shield large segments of formal wage earners.

Hence, a former president of the Chartered Institute of Bankers of Nigeria, Prof. Segun Ajibola, observed that the transformation of the FIRS into a mega revenue agency might yield no more than a change of name unless fundamental capacity gaps are addressed.

He cautioned that the new agency may struggle to match the operational effectiveness of the NCS and the NUPRC whose enforcement arm includes well-trained officers at border points and ports.

“These reforms touch the heart of the Nigerian economy,” he said, adding that effective implementation and a clear road map were critical to delivering their promised benefits,” he said.

Eminent petroleum economist, Prof. Wumi Iledare  has called on the government to ensure that the reform does not affect the potency of the PIA, which has stabilized Nigeria’s oil and gas investment climate.

He noted that weakening the financial autonomy of the NUPRC or the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) could damage investor confidence in a sector that drives the national economy.

“The tax act must align with the provisions of the PIA. Conflicting policies will only undermine one of the country’s most significant energy sector reform achievements,” Iledare said.