VAT
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The Federal Government of Nigeria has collected over N600 billion in Value Added Tax (VAT) from foreign digital giants such as Facebook, Amazon, and Netflix. According to Mathew Osanekwu, Special Adviser on Tax Policy to the Chairman of the Tax Reforms Committee, the collection is a result of amendments to the VAT Act, which empowered the Federal Inland Revenue Service (FIRS) to tax non-resident companies offering services in Nigeria. These companies are now registered in Nigeria and appointed as agents of collection, aligning with global best practices .
The tax reforms, which take effect in January 2026, aim to consolidate multiple taxes, remove overlapping charges, and tie levies to transparent, project-linked spending. Under the new framework, Nigerians earning less than N800,000 annually will be exempt from personal income tax, while small businesses with yearly turnover below N100 million will face a 0% corporate tax rate. Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Professor Taiwo Oyedele, emphasized that the reforms are designed to ease the tax burden on low- and middle-income earners while ensuring equity and fairness.
The reforms also seek to broaden the revenue base and improve compliance, as Nigeria’s tax-to-GDP ratio currently stands at about 10.8%, far below the African average of 16% and the global benchmark of 30%. Oyedele painted a sobering picture of Nigeria’s economic state as of May 2023, describing it as “on the verge of collapse” due to depleted reserves, subsidy-induced debts, and minimal crude available for sale .
*Key Highlights of the Tax Reforms:*
– *VAT Collection*: Over N600 billion collected from foreign digital service providers
– *Tax Thresholds*: Individuals earning less than N800,000 annually are exempt from personal income tax
– *Corporate Tax*: Small businesses with annual turnover below N100 million enjoy a 0% corporate tax rate
– *Tax System Overhaul*: Consolidating multiple levies, eliminating duplication, and tying collections to transparent, project-driven spending
Oyedele stressed that the framework is progressive, protecting vulnerable groups while fairly taxing higher earners. He also clarified that the much-debated Cybersecurity Levy predates the current administration and that President Bola Tinubu’s fiscal and tax reforms have not introduced any new taxes, contrary to widespread speculation.
