The Nigerian government has taken a bold step toward restructuring its tax system with the introduction of the Nigeria Tax Bill 2024 and other related tax administration bills. These reforms aim to enhance revenue generation, simplify tax compliance, and ensure a fairer tax regime for individuals and businesses.
Following deliberations by the National Assembly, key amendments have been made to the proposed bill, shaping the future of taxation in Nigeria. This article highlights the major updates, their implications, and what taxpayers need to know.
KEY UPDATES IN THE NIGERIA TAX REFORM BILL
Corporate Income Tax: No Reduction in Rates
Initially, the bill proposed a gradual reduction of the corporate income tax rate from 30% to 27.5% in 2025 and 25% in subsequent years to encourage business growth and attract foreign investment. However, this provision was rejected by the House of Representatives, meaning the corporate tax rate remains at 30% for large companies. Small businesses, however, continue to enjoy tax exemptions under existing laws.
PERSONAL INCOME TAX RELIEF FOR LOW-INCOME EARNERS
To ease the financial burden on lower-income earners, the tax bill provides a personal income tax exemption for individuals earning ₦800,000 or less annually. This change is intended to reduce the tax burden on low-income Nigerians and improve their disposable income.
VALUE-ADDED TAX (VAT) STAYS AT 7.5%
One of the most debated provisions of the tax bill was the proposal to increase Value Added Tax (VAT) from 7.5% to 12.5% by 2026. However, lawmakers rejected this increment, ensuring that the VAT rate remains at 7.5%. This decision prevents additional cost burdens on consumers while maintaining a steady revenue stream for the government.
DIGITAL TAX ADMINISTRATION FOR EFFICIENCY
The Nigeria Tax Administration Bill 2024 introduces measures to streamline tax collection and improve compliance. Some of its provisions include:
Expansion of digital tax filing systems to reduce paperwork and bureaucracy.
Stronger enforcement against tax evasion, with higher penalties.
Simplified tax procedures for small businesses to enhance compliance.
Additionally, the Nigeria Revenue Service (Establishment) Bill 2024 seeks to create a more efficient tax collection agency, reducing administrative bottlenecks and increasing transparency.
HARMONIZATION OF TAX COLLECTION ACROSS GOVERNMENT LEVELS
The Joint Revenue Board (Establishment) Bill 2024 creates a framework for cooperation between federal, state, and local tax authorities. This is expected to:
Reduce cases of multiple taxation.
Ensure uniform tax policies across different regions.
Improve revenue-sharing mechanisms between government tiers.
IMPLICATIONS OF THE NEW TAX REFORM BILL
FOR BUSINESSES
Large companies will continue paying a 30% corporate tax rate, contrary to initial expectations of a reduction.
Small and medium enterprises (SMEs) benefit from simpler tax compliance processes. Value added tax (VAT) remains at 7.5%, ensuring price stability for goods and services.
FOR INDIVIDUALS
Workers earning ₦800,000 or less annually are exempt from personal income tax, providing financial relief to low-income earners.
Digital tax services may improve the ease of filing taxes for individuals.
FOR THE GOVERNMENT
The reforms are expected to boost revenue collection while maintaining economic stability. Stronger enforcement of tax compliance could increase Nigeria’s tax-to-GDP ratio, which has historically been low.
Nigeria’s latest tax reform represents a significant shift in tax administration, aiming to balance revenue growth with economic relief for businesses and individuals. While some anticipated changes—such as corporate tax reductions and VAT increases—were rejected, the bill still introduces crucial measures to enhance compliance and improve efficiency.
As the government moves forward with implementation, taxpayers (both individuals and businesses) must stay informed about these changes to ensure compliance and take advantage of available tax benefits.
