At long last, Nigeria has a unified and consolidated tax law known as the Nigeria Tax Act (NTA) 2025. The previously separate laws, including the Capital Gains Tax Act (CGTA), Companies Income Tax Act (CITA), Industrial Development (Income Tax Relief) Act, Personal Income Tax Act (PITA), among others, have been repealed and harmonized. Apart from the fact that the NTA removes tax ambiguity, duplication of laws, and multiple taxation, some of its provisions contain one thousand and one benefits that will be beneficial to Nigerians and potentially boost the government’s revenue base. Nonetheless, there are some grey areas that need to be revisited. The fact that laws are generally a work in progress and are amended as need arises makes it possible for improvement. This op-ed identifies some of the worthy provisions as well as areas that require revisitation.
After decades of burdening companies with loss-making moments through minimum tax, the erstwhile section 33 of CITA has been repealed, ensuring that loss-making companies do not pay at all. This is rational and should have been the irreducible standard. Prior to this, companies at a loss often paid from their capital. Interestingly, the deliberate intent to breathe life into small companies is noteworthy. Under the NTA, small companies with an annual turnover threshold of ₦50 million or less are exempted from Company Income Tax (CIT). The waiver is further heightened in the Nigeria Tax Administration Act (NTAA) 2025, which states that small companies with less than ₦100 million in annual turnover are exempt from Value Added Tax (VAT). These are commendable. It is significant to note that a company may be exempt from VAT but still be mandated to pay income tax at a standard 30% rate if its turnover falls between ₦50 million and ₦100 million. Knowing fully well that companies outside the incentive bracket are liable to the 30% rate, it can be reduced to 25% based on an order issued by the President on the advice of the National Economic Council (NEC).
Furthermore, the capacity of section 163(1)(o) of the NTA to boost the Nigerian economy cannot be underestimated. It provides a five-year income tax exemption for companies in the agricultural sector for the first five years of their operation. These include companies focusing on crop production, livestock, aquaculture, forestry, dairy, cocoa processing, and other related activities. There is no mincing words that this has the potential to reduce food prices in the market.
Against the backdrop of President Bola Ahmed Tinubu’s objective to tax prosperity and not poverty, there are many provisions of the NTA and NTAA that appear self-contradictory and likely to be more punitive to ordinary Nigerians, who are already reeling under a harsh economy caused by subsidy removal and dwindling purchasing power. The retention and shifting of stamp duty from the recipient to the sender should be thoroughly amended. Under the new rule, thesender will pay an extra ₦50 for sending ₦10,000 or more. Since the NTA aims to tax prosperity and not poverty, the stamp duty should be eliminated for transactions below ₦100,000, and the fee might be increased to make-up for the government revenue lost from those exempted.
Section 58 of the NTA, which introduces a progressive tax system, equally needs to be reviewed. While it exempts individuals earning ₦800,000 or less annually from Personal Income Tax (PIT), this threshold should be increased to ₦1,200,000. Anyone earning ₦1,200,000 annually in 2026 Nigeria, which is averagely ₦100,000 per month and less than $1,000 per year, is multi-dimensionally poor. Still on income tax, the tax bands and rate grow in geometric progression. This should be done gradually. The new law establishes that ₦2,200,000 to ₦8,999,000 annual income will be taxed at a 15% PIT rate, ₦9,000,000 to ₦12,999,00 at an 18% PIT rate, ₦13,000,000 to ₦24,999,000 at a 21% PIT rate, ₦25,000,000 to ₦49,999,000 at a 23% PIT rate, and ₦50,000,000 and above at a 25% PIT rate. A slower pace is required to properly graduate Nigerians into the tax net.
More importantly, the alarm raised by a member of the House of Representatives from Sokoto State, Honorable Abdussamad Dasuki, that the gazetted version of the new tax laws was tampered with calls for serious attention. These laws, scheduled to take effect on January 1, 2026, are the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act. While President Tinubu remarked on December 30th that the implementation of the acts will commence on Jan 1, 2026, as planned, stressing that ‘no substantial issue has been established that warrants a disruption of the reform process,’ the tacit admission of an issue, whether substantial or not, beggars belief. This must be transparently addressed.
Over the years, the actions and inactions of the government have prompted many Nigerians to become tax evaders. The high level of distrust in political office holders, and their perpetual failure to deliver the dividends of governance, such as good roads, potable water, stable electricity, security, among others, have undermined the rationale for paying taxes. In developed countries, tax payment is the irreducible minimum residents voluntarily pay, as citizens and immigrants directly and indirectly feel the impact.
In the United Kingdom (UK), the PIT for annual income of £12,571 to £50,270 is 20%. It is 40% for annual income between £50,271 and £125,140, and as high as 45% for annual earnings above £125,140. While PIT is particularly noticeable in countries across Europe, Austria has the highest PIT rate, with a statutory rate of 55.0% as of 2025. Nigeria’s case cannot be different if we want to progress. However, this claim of progress can only be justified when there are tangible government social services to justify tax payment.
Hence, the government is urged to introduce PIT gradually and work to regain the trust of the people.Up till now, Nigerians do not have a reliable estimate of how much the new tax law will deliver to the coffers of the government. While this might sound premature, estimation is largely tenable for a government that formulates, implements, and manages a budget. More than at any other time, the federal government should set up an independent fiscal watchdog tasked with projecting tax expenditure, analyzing the possible consequences of proposed fiscal policy, and overseeing the activities of the new Nigeria Revenue Service (NRS) for accurate tax reporting and delivery. Apparently, a new tax law is inevitable, and the delivery by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Mr Taiwo Oyedele, is a good starting point.
Rasak Olanrewaju Salaam is a Political Scientist and Tech Entrepreneur. He can be contacted via
rasaksalaam@gmail.com
