Tax Reform Bill: Revealing the hidden facts

By Arabinrin Aderonke

Let’s be honest: For years, Nigeria’s tax system has been a source of frustration, confusion, and sometimes even unfairness. Whether you’re a small business owner fighting to keep your business going or a worker frustrated by the large portion of your paycheck that seems to vanish into taxes, we’ve all felt the strain. But things are finally changing since Dr. Zacch Adedeji took charge as the Executive Chairman of the Federal Inland Revenue Service, we’ve seen steady improvements: better efficiency, more transparency, and a clear vision for the future.

Nigeria is entering a new phase of economic transformation with President Bola Tinubu’s proposed tax reform bills. These reforms go beyond just changing tax laws, they’re about creating a system that is fairer, simpler, and more aligned with today’s economy. Designed to ease the financial burdens on ordinary Nigerians, these tax changes aim to unlock opportunities for citizens, support businesses, and improve government services nationwide.

First, let’s talk about the youth- Nigeria’s future. One aspect of these reforms is its focus on opening up the Nigerian economy to the world. By modernizing income tax laws to facilitate remote work, Nigeria positions itself as a competitive player in global business process outsourcing (BPO). We’ve all seen how the world has shifted to remote work, and it’s time for Nigeria to get on board. These reforms will open the door for young Nigerians by creating countless remote work opportunities right here in the country. This is more than just a policy; it’s an investment in our youth, in their future, and in their ability to compete on the global stage.

How is it going to be achieved?

The reforms are also a lifeline for Nigeria’s small businesses. For years, small and medium enterprises (SMEs) have faced high taxes and complex rules that made it tough to grow. With new exemptions on corporate income tax (CIT), withholding tax (WHT), and VAT for smaller businesses, the reform will allow these businesses to focus on creating jobs and investing in their future without being weighed down by taxes. By giving these businesses a chance to grow, the government is investing in Nigeria’s future and creating a more supportive environment for entrepreneurship.

For the average Nigerian household, these reforms offer much-needed relief from the rising cost of living. Essentials such as food, healthcare, education, rent, and public transportation, which make up the largest portion of family expenses, will now be exempt from VAT. These items account for about 82% of household consumption on average, with nearly 100% for low-income families. This change will help ease the financial strain many households face daily, showing that the government understands these challenges and is committed to providing relief where it is most needed.

The introduction of the Tax Ombudsman is also a move in the right direction. This office will advocate for taxpayers, protect vulnerable groups, and hold the system accountable. For too long, taxpayers have felt powerless now, they’ll have a voice. This is the beginning of restoring trust in our government and tax system. The Tax Ombudsman will ensure that those who pay their dues are not taken advantage of and that the system operates with fairness and transparency.

The corporate world will benefit too. Corporate income tax will be reduced from 30% to 25% over the next two years, and earmarked taxes will be replaced with a harmonized, single levy at a reduced rate. This is about creating a business-friendly environment where investment can thrive. Nigeria will become a more attractive destination for both local and international investors, who will have the confidence to invest in the Nigerian economy, knowing they’ll be operating in a fair and predictable tax environment. More businesses will mean more jobs, more services, and a stronger economy.

Taxpayers will no longer be confused by an endless list of taxes and levies. There will be clarity. There will be ease. And most importantly, there will be fairness across the board, as the government rationalizes how tax revenue is distributed, ensuring that every state and region gets its fair share.

If there was ever a time for optimism, it’s now. These tax reforms are the turning point Nigeria needs. The tax system will no longer feel like a barrier to progress, but a partner in building a better future. It’s time to stop complaining and start seeing the potential of what these reforms can bring. For the first time in a long time, Nigeria has a real opportunity to build a tax system that works for everyone.

Arabinrin Aderonke Atoyebi is the technical assistant on broadcast media to the Executive Chairman of the Federal Inland Revenue Service.