Nigeria launches new tax regime promising relief for low-income earners

(Patria) - Nigeria on Thursday launched a new tax regime that officials said would broaden the tax base, ease the tax burden for low-income earners and small businesses, and simplify collection and administration, AFP reported.

The new system, based on four laws signed in June, came into effect despite opposition calls for a postponement, which claimed the government had made unauthorized changes to the tax law.

The four laws - the Nigeria Tax Law, the Nigeria Tax Administration Law, the Nigeria Tax Service Law (Establishment), and the Joint Tax Board Law (Establishment) - represent a "one-stop shop" while increasing revenue generation and reducing the tax burden for low-income earners, tax expert Chukwuema Eze told AFP.

Opposition leader Atiku Abubakar accused the government of introducing "illegal and unauthorized amendments" to the laws.

President Bola Tinubu, a strong proponent of tax reforms, dismissed the claims, calling them "premature" and "reactive," and said the new tax regime is in Nigeria's best interest.

"No significant issue has been identified that would justify halting the reform process," Tinubu said in a statement on Tuesday.

In his New Year's message, the president insisted that his tax reforms were "designed to build a fair, competitive, and robust fiscal foundation for Nigeria".

"By harmonizing our tax system, we aim to sustainably increase revenue, address fiscal distortions, and strengthen our capacity to finance the infrastructure and social investments that will bring shared prosperity," he said.

According to government data, the West African economic powerhouse has a tax-to-GDP ratio of 13.5 percent, which is below the continental average. The tax-to-GDP ratio is a measure of a government's ability to raise money for public services and infrastructure. For comparison, the European Union and the United States have this ratio above 25 percent.

Nigeria, divided into 36 states, has long struggled to reform its tax system, and the government claims its new package will "harmonize" levies across the country.

"This is a significant step towards building a simpler, fairer, and more growth-oriented tax system," Taiwo Oyedele, who leads Tinubu's tax reform committee, said on X on Thursday.