Taxation
By Olayiwola Mercy
The 2025 tax reforms in Nigeria aim to create a fairer and more efficient tax system, according to Zacch Adedeji, Chairman of the Nigeria Revenue Service (NRS). The reforms target fairness, not a higher burden on taxpayers. Key changes include a more progressive personal income tax regime, exempting low-income earners, and increasing tax rates for high-income individuals.
The reforms also consolidate multiple tax laws into a single, unified legislation, simplifying compliance and reducing duplication. This is expected to enhance transparency and reduce conflicts between tax authorities and taxpayers. The NRS has been established to replace the Federal Inland Revenue Service (FIRS), with a focus on autonomy, accountability, and modernity.
A new development levy of 4% on assessable profits replaces several sector-specific taxes, reducing administrative overhead and increasing compliance. The reforms also introduce e-invoicing and real-time VAT systems to improve tax administration
The tax reforms have been welcomed by some, but others have expressed concerns about potential economic and social consequences. Peter Obi, former Anambra State Governor, warned that the reforms risk deepening public distrust and worsening economic hardship if not properly implemented .
The reforms aim to increase revenue generation, simplify tax processes, and promote economic growth. The NRS is working to ensure effective implementation, stakeholder engagement, and institutional capacity building.
Some of the key changes include:
– *Tax Exemption for Low-Income Earners*: Individuals with taxable profits of ₦800,000 or less per year are exempt from paying personal income tax.
– *Revised PIT Bands*: A more progressive structure with increased marginal tax rates for high-income individuals.
– *Capital Gains Tax*: Increased from 10% to 30% for companies, aligning with corporate tax rate .
The reforms are expected to improve Nigeria’s tax-to-GDP ratio, currently among the lowest globally. The NRS aims to achieve a minimum tax-to-GDP ratio of 18% within three years without stifling investment or economic growth.
