Activista Nigeria Position Paper on The New Tax Law

Activista Nigeria Position Paper on The New Tax Law.

PREPARED BY ACTIVISTA NIGERIA 

Introduction 

Activista Nigeria is a youth-led, people-powered movement working to advance social justice, civic accountability and inclusive governance across Nigeria. We amplify the voices of young people, women, workers and marginalized communities through advocacy, mobilization and policy engagement. Our mission is to ensure that public policies, especially those related to economic, gender, climate and social rights, reflect the lived realities of ordinary Nigerians and serve the common good. In recent years, we have prioritized tax justice as a critical pillar of democratic accountability and equity.   

The Nigeria Tax Reform Law 2025, recently signed into law by President Bola Ahmed Tinubu, introduces one of the most comprehensive overhauls of the country's tax system in recent history. It seeks to simplify tax administration, boost revenue, expand the tax base and integrate digital services taxation into the national fiscal framework. The reforms were part of four bills transmitted to the National Assembly in late 2024 and have now been consolidated into a single legal framework set to take effect from January 1, 2026. This reform comes at a time when Nigeria faces serious economic inequality. With over 133 million Nigerians living in multidimensional poverty, an inflation rate hovering around 22% and persistent unemployment, it is vital that tax policies provide both equity and relief. A tax system must serve as a redistributive tool, not a punitive one.

This position paper presents Activista Nigeria’s analysis of the newly enacted law through the principles of tax justice, transparency and social accountability. We recognize and welcome several progressive aspects of the law, including Value Added Tax exemptions on essential goods, tax relief for low-income earners and small businesses and the effort to ensure foreign digital companies pay their fair share. However, these gains must be safeguarded during implementation and several issues such as regressive VAT increases, corporate tax privileges and limited gender sensitivity must still be addressed.

Objectives of the Law

The Nigeria Tax Reform Law is ambitious in scope and proposes a restructuring of Nigeria’s tax system around seven key objectives:

1. Simplification of the tax architecture through the establishment of the Nigeria Revenue Service (NRS), consolidating federal and state tax operations.

2. Increased VAT from 7.5% to 10%, intended to generate more non-oil revenue.

3. Exemption of essential goods and services including food, healthcare, pharmaceuticals, education, rent and public transport from Value Added Tax, protecting low-income households.

4. Relief for low-income individuals, with those earning N800,000 or less per year exempted from Personal Income Tax.

5. Support for micro and small enterprises, including a simplified tax regime and compliance waivers for businesses with annual turnover under N50 million.

6. Introduction of a digital services tax, requiring multinational digital companies operating in Nigeria to pay taxes on their local revenues.

7. Establishment of taxpayer protection mechanisms, including a Tax Ombudsman and time-bound refund and appeals processes.

These objectives, if implemented transparently have the potential to improve Nigeria’s fiscal capacity while protecting the most vulnerable. The real challenge lies in execution and ensuring that the reforms truly deliver social value.

Key issues in the Law

While we commend the government for integrating important relief measures, there remain critical areas of concern that must be addressed before full implementation in January 2026.

1. Regressive Potential of the VAT Increase

Even with exemptions on basic goods and services, a 10% VAT will impact many everyday transactions, especially for those whose spending is not exclusively on exempt items. For low-income families, even marginal price increases can mean cutting essential spending on food or healthcare.

2. VAT Exemptions: Strong but Require Enforcement

The law correctly zero-rates key goods like unprocessed food, medicine, education, transport, and residential rent. However, enforcement and clarity will determine their success. Businesses may still apply VAT unlawfully without clear oversight and lack of consumer awareness could lead to exploitative pricing.

3. Support for Informal Workers Still Limited

While the law provides a simplified compliance framework for small businesses, many informal workers still lack the financial literacy, digital tools, or administrative support needed to register and comply. Without accompanying support services, even simplified systems may push them further into informality.

4. Corporate Tax Incentives Raise Fairness Questions

Although the law offers relief to small firms, it retains generous tax breaks for large firms in extractive sectors. Oil, gas and telecom giants continue to benefit from incentives and deferments, raising concerns about equity in burden-sharing.

5. Digital Tax Is a Step Forward

The introduction of a digital tax is one of the law’s most progressive elements. For years, multinational tech companies earned revenue from Nigerian users without paying taxes. If well implemented, this could rebalance the system and improve horizontal fairness.

6. Taxpayer Rights Improved, But Require Awareness

The Tax Ombudsman, the Appeal Tribunal and capped penalties give citizens a stronger legal footing in tax matters. However, these protections are only useful if citizens are aware of them and can access them without fear, bureaucracy, or cost barriers.

7. Gender and Climate Blind Spots

Despite the law’s relief for low earners, it lacks a gender-responsive approach. Women-led businesses are concentrated in low-income, informal sectors yet face multiple barriers. Similarly, the law fails to integrate environmental accountability, such as green taxes or targeted climate financing.

Implications for Everyday Nigerians 

The Nigeria Tax Reform Law introduces some progressive protections particularly VAT exemptions and income thresholds that could help shield low-income Nigerians from the harshest effects of taxation. For the 133 million Nigerians in poverty, these exemptions are critical.

However, real-world application matters. Without strong enforcement, VAT may still be passed onto consumers. For instance, a trader buying cooking oil or paying rent on a small kiosk may still experience inflated prices if suppliers or landlords ignore the VAT exemption or apply new service levies. Similarly, while income tax exemptions help salaried workers, most Nigerians work informally and may not benefit unless reforms are paired with broader economic support.

Micro-enterprises and informal businesses require more than a tax waiver, they need simplified registration processes, access to credit, financial literacy training and safeguards against harassment by tax agents. If these are not provided, the risk is that the informal sector remains locked out or is penalized into extinction.

Meanwhile, the VAT increase even if modest, has symbolic implications. It shifts attention away from taxing wealth, capital gains and elite privilege, placing the spotlight back on consumers and workers. A just tax system must do more to make the wealthy and multinational firms contribute meaningfully to the common good.

Tax Justice Analysis 

From a tax justice standpoint, this law marks some progress, especially in attempting to shield the poor through zero-rating, simplifying compliance for small businesses and ensuring foreign corporations pay taxes on profits made within Nigeria.

However, genuine tax justice requires deeper redistribution. A progressive tax system should:

Focus more on taxing luxury consumption and high-net-worth individuals.

Close loopholes used by corporations in resource extraction sectors.

Expand the tax net without criminalizing informality or increasing hardship.

Ensure revenue is reinvested in public goods like schools, healthcare, roads, and social protection.

Tax justice is not just about what is taxed, but who pays, who benefits and who decides. This law takes important steps in the right direction but must evolve further to center fairness, gender, climate and regional equity.

Accountability and Transparency

Transparency is where this law is weakest. While the Nigeria Revenue Service is meant to unify tax collection, there are no strong mandates for revenue reporting, public expenditure audits or citizen engagement in budgeting.

Taxpayer protections such as the Ombudsman and Tribunal are welcome, but must be accompanied by public education, access to legal support and translation into local languages.

Activista  Nigeria calls for:

A public tax expenditure report published annually.

State-level participatory budgeting sessions funded by VAT revenues.

A national Tax Justice Dashboard tracking where money comes from and where it goes.

Public education campaigns to build confidence and compliance among citizens.

Conclusion

The Nigeria Tax Reform Law 2025, introduces genuine reforms that if implemented transparently and fairly, can improve Nigeria’s tax system. Its exemptions for essential goods relief for low-income earners and digital tax framework reflect an intention to modernize while protecting the poor.

But intentions are not enough. Activista Nigeria believes this law must be followed by strong enforcement, public education, gender and climate-sensitive amendments, and real civic oversight.

We call on all stakeholders. Government, Lawmakers, Civil Society Organizations and Citizens to ensure this law becomes a vehicle for equity, accountability and development.