The Presidential Committee on Fiscal Policy and Tax Reforms has announced the implementation of a system that would precisely calculate tax brackets based on individual and corporate economic activities. With the implementation of a new data-driven tax system, the Nigerian government is making a substantial step toward enhancing the country’s business environment and raising Revenue generation. Taiwo Oyedele, the chairman of the committee, claims that many businesses pay excessive or inadequate taxes as a result of the current inefficient tax system.
In order to solve this issue, the new system—which is based on effective implementations in nations like South Africa, Kenya, and Rwanda—makes sure that companies pay the right amount of tax according to their income and profitability. The new system is anticipated to give businesses more certainty and predictability by simplifying the Tax Collection process and lowering the possibility of tax evasion. This will promote an environment that is more favorable for Investment and economic expansion. Furthermore, Infrastructure and other vital public services can be funded with the extra money raised by the tax system reform.
Presidential Tax Committee proposed low tax for SMEs.
For Nigeria’s business community, the introduction of the data-driven tax system is a welcome development and a critical step in creating a more robust and competitive economy. By January 2025, the government is expected to enact the new withholding tax laws, which offers reduction in rate and complete exemption from withholding tax for numerous businesses, including SMEs with annual turnover not exceeding ₦25 million. The establishment of the Presidential Committee on Fiscal Policy and Tax Reforms in 2023 marked a major advancement in Nigeria’s tax reform process.
This action is a part of President Bola Tinubu’s larger economic plan, which aims to make taxes a key factor in promoting sustainable development. The committee has proposed a number of proposals designed to lower taxes on small and medium-sized enterprises and encourage expansion. These include provisions to make tax filing more convenient for small business owners and microenterprises, as well as a decrease in the corporate Income Tax for these entities. The committee have also proposed increasing tax breaks for particular industries including manufacturing, technology, and agriculture—all of which are essential to Nigeria’s goals of economic diversification.
Tinubu focuses on raising the tax-to-GDP ratio.
By decreasing taxes and offering holidays or exemptions for enterprises operating in these areas, the government aims to encourage increased investment and job creation, particularly in the non-oil sector. Value Added Tax (VAT) reform is another crucial area of reform, as it has been a contentious issue in Nigeria’s budgetary discussions. It was proposed that the government should introduce a more tiered VAT system where necessary commodities, particularly foodstuffs and other basic requirements, remain free or charged at lower rates in order to prevent unduly burdening the poor.
As outlined under his Renewed Hope Agenda, President Bola Tinubu’s economic reforms aims to establish a more justified and efficient tax system. President Tinubu emphasized the necessity of raising the tax-to-GDP ratio which has historically been low in comparison to many other African countries. Instead of enacting new taxes, his administration is more concerned with expanding the revenue base. The government intends to raise more revenue without burdening compliant taxpayers too much by bringing more people and businesses—especially those that operate informally—under the tax net.
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Along with removing unnecessary taxes, the tax reform procedure aims to standardize the tax structure at the federal, state, and local levels. This is aimed at lessening the occurrence of double taxes, which has been a significant grievance among business owners. The overarching goal is to create a tax system that is inclusive, transparent, and growth-oriented. Nigeria intends to boost economic development, particularly among SMEs, and increase government revenues to support infrastructure, healthcare, education, and other vital services by reducing the burden and making taxes more predictable.