A Fellow of the Chartered Institute of Taxation of Nigeria (CITN), Mr. Olugbenga Obatola, says the new Nigerian Tax Reform Act will ease the tax burden on low-income earners while placing greater emphasis on taxing affluence.
Obatola, who spoke in Ibadan on Monday, said the new regime, which takes full effect from January 2026, represents one of Nigeria’s most progressive fiscal policy shifts in recent years.
According to him, the reform aims to promote economic equity, simplify tax administration, and broaden the national revenue base.
“The new tax regime is very progressive. It shifts focus from taxing poverty to taxing affluence. Those earning less than ₦90,000 to ₦100,000 monthly will no longer pay a dime as tax,” he said.
He explained that the Nigerian Tax Act 2025 harmonises several tax laws, replacing 11 out of 40 existing taxes and amending 13 others. The Act merges key statutes such as the Company Income Tax, Stamp Duty, Capital Gains Tax, and Value Added Tax under one framework for easier reference and enforcement.
Obatola said the reform package consists of four principal laws — the Nigerian Tax Act 2025, Nigerian Tax Administration Act 2025, Nigerian Revenue Service Establishment Act 2025, and Joint Revenue Board Establishment Act 2025.
He added that the Nigerian Revenue Service and Joint Revenue Board began operations in June 2025, serving as precursors to the full rollout of the other laws next year.
Obatola, also a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN), noted that the Act corrects Nigeria’s long-standing “taxing proficiency” practice, which subjected low-income earners to taxes despite their limited means.
“If you earn about ₦100,000 monthly, after statutory deductions, your taxable income falls within ₦800,000 annually — which attracts zero per cent tax,” he explained.
He listed six statutory deductions under Section 30 of the Act: National Housing Fund, National Health Insurance Scheme, pension contribution, mortgage interest, rent relief, and other allowable deductions.
“The new rent relief replaces the Consolidated Relief Allowance and allows the higher of 20 per cent of rent allowance or a maximum of ₦500,000,” he said, adding that taxpayers must present verifiable rent receipts to claim reliefs — a move expected to improve accountability and bring landlords into the tax net.
He also disclosed that multinational companies operating in Nigeria will now pay tax on income generated locally at an effective rate of 15 per cent, with a global top-up rate applying where payments fall below that threshold.
Obatola projected that the reforms would lift Nigeria’s tax-to-GDP ratio from 13.5 per cent in 2024 to about 15 per cent by the end of 2025, while the new 15 per cent import levy on foreign goods would protect local industries and stimulate domestic production.
“By discouraging excessive imports and promoting local manufacturing, we are ensuring that Nigeria’s resources serve Nigerians first,” he said.
He urged citizens to embrace the reform with optimism, stressing that it would strengthen the economy and improve living standards.
“The poor will finally be able to breathe, and the system will become fairer for all,” Obatola said.
