President Bola Tinubu’s Tax Reform Bills have sparked intense debate in Nigeria, with some hailing them as a path to prosperity and others warning of peril. The proposed changes aim to modernize Nigeria’s tax system, broaden the revenue base, and reduce the tax burden on vulnerable citizens. However, the reforms’ rollout has been mired in controversy and confusion, sowing doubt among the citizens they are meant to benefit.
The reforms offer several promising features. The exemption of individuals earning less than ₦800,000 annually from income tax and the redefinition of small businesses to include firms with turnovers up to ₦50 million are steps toward reducing the tax burden on Nigeria’s economically vulnerable. Similarly, the consolidation of multiple levies into a single development tax and the phased reduction of corporate income tax from 30 percent to 25 percent could ease compliance for businesses and stimulate growth.
However, the gradual increase in Value Added Tax (VAT) rates from 7.5 percent to 15 percent by 2030 raises concerns about the impact on low-income households. While exemptions for basic necessities such as food, medicine, and education mitigate some impact, indirect taxes disproportionately affect low-income households. In a nation grappling with inflation and widespread poverty, the risk of worsening economic hardship cannot be ignored.
Furthermore, the reforms’ emphasis on targeting high earners—mandating financial institutions to report transactions exceeding ₦25 million monthly—signals a bold intent to draw Nigeria’s affluent class into the tax net. Yet this ambition must be matched with robust enforcement. Historically, Nigeria’s elites have evaded taxes through legal loopholes and lax oversight, leaving ordinary citizens to bear the brunt of fiscal policy. Without systemic reforms to close these loopholes, this initiative risks becoming another exercise in futility.
A significant aspect of the reforms is the centralisation of tax collection, transferring duties from agencies like the Nigeria Customs Service to the proposed Nigeria Revenue Service (NRS). While this aims to enhance efficiency, centralization can exacerbate bureaucratic bottlenecks if not accompanied by capacity building and institutional reforms.
Moreover, the new VAT derivation formula, which allocates 60 percent of revenues to states based on consumption, marks a shift toward fiscal federalism. Yet, whether states will channel these additional resources into public services or squander them on wasteful governance remains an open question.
Underlying the scepticism surrounding these reforms is a deeper crisis of trust. Nigerians have long endured policies that promise relief but deliver pain. Tinubu’s administration must confront this credibility deficit head-on by committing to transparency in revenue collection and expenditure. Detailed reporting on how tax revenues are allocated—whether to infrastructure, healthcare, or education—could rebuild faith in government.
The reforms also lack a clear articulation of their long-term vision. How will these changes prepare Nigeria for the challenges of a global economy increasingly driven by technology and sustainability? For reforms to succeed, they must go beyond immediate revenue generation to address structural inefficiencies and foster a culture of accountability.
In conclusion, Tinubu’s tax reforms present an opportunity to reset Nigeria’s fiscal trend. However, their success hinges on rigorous implementation, transparent governance, and a genuine commitment to equity. The administration must ensure that the reforms’ burden does not fall disproportionately on the poor while the wealthy and politically connected remain shielded. Without this balance, these reforms risk exacerbating the very inequalities they aim to address, undermining public trust in the process.
As Nigeria navigates this critical juncture, it is essential to prioritize the needs of its most vulnerable citizens. The government must ensure that the tax reforms do not exacerbate existing inequalities but instead promote a more just and equitable society. The fate of Nigeria’s economic future hangs in the balance, and the outcome of Tinubu’s tax gamble will have far-reaching consequences for generations to come.
