A key focus of the reforms is simplifying the tax structure by reducing over 60 taxes to just eight and consolidating tax collection under a single Nigerian Revenue Service to improve efficiency and reduce administrative burdens. The reforms also propose raising the VAT rate to 12.5% by 2026 while exempting essential goods like food and medicine, ensuring minimal impact on low-income earners.
Equity and fairness are central to the proposed changes. The introduction of a Tax Ombudsman aims to address taxpayer grievances and rebuild public trust in the tax system. The reforms also seek to ease the tax burden on poorer citizens while ensuring that wealthier individuals and corporations pay a fair share. Additionally, VAT revenue distribution is expected to shift to a derivation-based model, where states receive allocations based on what they generate—a move that supports fiscal federalism but raises concerns over regional equity.
To further boost revenue, the plan emphasizes broadening the tax base and enhancing compliance rather than imposing new taxes. This includes exempting small businesses from certain levies and making the tax system more transparent and business-friendly to attract investment. If fully implemented, the reforms are expected to raise Nigeria’s tax-to-GDP ratio from 10.86% to the African average of 15.6% within three years, enabling the government to invest in infrastructure, healthcare, and education while fostering inclusive economic development.
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