President Bola Tinubu’s tax reform bills, which have recently passed their second reading in the Nigerian Senate, aim to overhaul the country’s tax system.
The four bills include the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill.
The proposed reforms intend to simplify tax administration, reduce burdens on low-income earners, and eliminate double taxation.
Notably, individuals earning below N800,000 annually would be exempt from personal income tax, a significant increase from the previous threshold of N300,000.
For small and medium enterprises (SMEs) with revenues below N50 million, the bills propose complete corporate tax exemptions. This change is expected to benefit up to 90% of businesses in Nigeria, allowing them to reinvest profits for growth.
Additionally, the corporate income tax rate for larger companies will be reduced from 30% to 25% by 2026. The reforms also address value-added tax (VAT) distribution.
The proposed sharing formula allocates 55% of VAT to state governments and reduces the federal government’s share from 15% to 10%, aiming to ensure states receive funds based on local consumption.
However, this aspect has faced criticism from northern governors who argue it disproportionately benefits southern states like Lagos and Rivers.
Overall, Tinubu’s tax reform bills are designed to create a more equitable tax system that supports small businesses and low-income earners while promoting economic growth.
However, they also face opposition and require further legislative scrutiny before implementation.
The proposed tax reform bill in Nigeria includes significant changes to corporate tax rates. Under the new structure, small companies (revenue ≤ N25 million) will continue to be exempt from corporate income tax.
Medium companies (revenue between N25 million and N100 million) and large companies (revenue > N100 million) will have a unified tax rate.
In 2025, the corporate tax rate will be set at 27.5% for both medium and large companies.
From 2026 onward, this rate will decrease to 25%. Additionally, if a company’s effective tax rate falls below 15%, it must pay additional taxes to meet this minimum requirement.
Following objections and from northern governors, however, the president has directed the judiciary to address the legal framework for the bill to ensure that Nigerians get a better understanding of it and can go home without reservations.
