Building A Sustainable Tax System In Nigeria: Insights And Implications Of The Nigeria Tax Reform Laws (2025)

By Oluwaleye Adedoyin Grace

ABSTRACT

This article provides a comprehensive analysis of Nigeria’s tax system, exploring its structure, key tax types, and the critical role taxation plays in national development. It examines the challenges hindering effective tax administration, including fragmentation, high compliance costs, and legal ambiguities. Central to the discussion is the Nigerian Tax Reform Laws 2025, a transformative legislative framework aimed at harmonizing tax laws, broadening the tax base, and enhancing revenue mobilization. The article outlines strategic recommendations for building a sustainable tax system through policy reforms, institutional strengthening, technological innovation, and public engagement. By contextualizing Nigeria’s tax landscape within the new reform, this work offers valuable insights into the path toward a more efficient, equitable, and growth-oriented tax regime.

Keyword: Tax, Taxation, Nigeria Tax Reform Law (2025), Nigeria Tax Act, Types of Taxes Tax Revenue, Tax Policy, Tax Jurisdiction, Tax Compliance, Finance Act 2023, Tax Administration, Digital Taxation, Tax Legislation, Tax Appeal Tribunal (TAT)

INTRODUCTION

The term ‘tax’ originates from the Latin word taxo meaning ‘I estimate’. Benjamin Franklin, an American statesman in his letter to Jean-Baptiste Le Roy said “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.”[1] This phrase, underscores the inevitability of taxes, akin to death itself,  as a fundamental aspect of human society and governance.

Taxation is the lifeblood of any nation’s economic development and governance. In Nigeria, a country with vast economic potential and complex fiscal challenges, an effective tax system is essential for funding public services, infrastructure, and social programs that drive growth and improve living standards. However, Nigeria’s tax landscape has historically been characterized by fragmentation, overlapping jurisdictions, and compliance difficulties, which have limited its capacity to generate adequate revenue.

The recent accent by the president to this Nigerian Tax Reform Laws marks a significant milestone in the country’s efforts to modernize and harmonize its tax framework. This comprehensive reform seeks to simplify tax laws, broaden the tax base, enhance administrative efficiency, and foster a culture of compliance. This article explores the current tax system in Nigeria, its importance, the challenges it faces, and the transformative potential of the Nigerian Tax Reform Laws. Through this analysis, it provides a roadmap for building a sustainable, transparent, and growth-oriented tax regime that can support Nigeria’s development aspirations

HISTORY OF TAXATION IN NIGERIA

Pre-Colonial Era

In Northern Nigeria, under the Fulani emirates, a structured system of taxation existed, based on Islamic principles such as Zakat and Jizya, which funded governance administration and social welfare. Conversely, Southern Nigeria, taxation was less formal, relying on tributes, tolls, and levies collected by chiefs and traditional rulers, often irregular and arbitrary manner. Distinct ethnic groups had distinct systems: Hausa-Fulani emirates had Islamic taxes; Yoruba kingdoms collected taxes in kind; Igbo societies had communal contributions rather than formal taxes.

Colonial Era (1861–1960)

The British introduced formal taxation to finance colonial administration, starting with the Stamp Duties Proclamation (1903) and Native Revenue Proclamation (1906) under Lord Lugard, who sought to harmonize and centralize tax collection. The Native Revenue Ordinance of 1917 formalized tax collection in Southern Nigeria and was extended to Eastern Nigeria by 1928. This ordinance was seen as discriminatory as it applied mainly to natives outside Lagos. Direct taxes targeted adult males, while indirect taxes included customs duties. Native authorities were empowered to collect taxes locally, though this system had inefficiencies and caused resistance, such as the Aba Women’s Riot of 1929. The Raisman Commission (1958) introduced standardized tax principles incorporated into Nigeria’s constitution, leading to laws like the Income Management Act and Companies Income Tax Act of 1961.

Post-Independence Era (1960–Present)

Post-independence. Nigeria retained colonial tax structures but sought reforms to broaden the tax base and improve efficiency. The 1980s Structural Adjustment Program (SAP) brought tax reforms to reduce reliance on oil revenue and diversify the economy. A major reform was the introduction of Value Added Tax (VAT) in 1993, replacing sales tax and shifting focus to consumption-based taxation. Since 1999, democratic governance has driven further fiscal reforms to enhance economic growth and tax administration. Despite these developments, challenges such as cultural diversity, a large informal sector, tax evasion, corruption, and political instability have hindered effective tax collection and utilization for economic development.

WHAT IS TAX?

Tax has been variously defined by scholars, from legal and social science perspectives, and it has also been judicially interpreted in several cases. In  Matthews v Chicory Marketing Board[2]  tax was defined as a ‘compulsory exaction of money by a public authority for public purpose or raising money for the purpose of government by means of contributions from individual persons’.  However, this definition limits taxation solely to individuals which is not entirely accurate. Tax is imposed not only on individuals but also on corporate entities. Examples include Technology tax, Company Income Tax(CIT), Petroleum Profits Tax(PPT), which are levied on companies.

In light of this, Adam Smith, defines taxation as an exaction of compulsory payment on both individuals and corporate entities[3]^.  Similarly, Yunusa defined taxation as the system of imposing a compulsory levy on all income, goods, services and properties of individuals, partnership, trustees, executors and companies by the government.[4]

Another widely accepted definition is that tax is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.[5]

Charles E. McLure Jr. defines tax as a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to collectively fund government spending, public expenditures, or as a way to regulate and reduce negative externalities.[6] According to this writer, tax is a mandatory, not conditional exaction of money, imposed by the government or a valid law with legitimate authority on individuals (typically adult citizens and residents)  and registered entities such as companies, to fund public purposes.

Correspondingly, Nigerian Tax Reform Laws (2025) broadens the definition of taxpayers to include individuals, companies, partnerships, trustees, and other entities, aligning with scholarly definitions that tax applies beyond just individuals[7]. It consolidates multiple tax laws (e.g., Companies Income Tax Act, Personal Income Tax Act, Petroleum Profits Tax Act) into a single framework, reflecting the comprehensive nature of taxation on both individuals and corporate bodies[8]. It also defines tax as a compulsory, non-conditional payment imposed by law to fund government activities, consistent with the principle that there is no direct quid pro quo for tax payments[9].

It is important to note that there is no direct benefit in return for the payment of tax. Meaning that the taxpayer should not expect the government to render a particular service to him in return for the payment of the tax. There is no Quid Pro Quo.  No direct benefit in return for the tax paid. E.g. ifa Lekki man’s tax is being used to develop Surulere, he should not complain. This principle that there is no quid pro quo in tax was restated in United States V Lee (1982) (455 U.S.252)

TYPES OF TAXES IN NIGERIA

Nigeria imposes a variety of taxes for different purposes levied on individuals, businesses and other entities. The main type of taxes includes:

1. Personal Income Tax (PIT)
2. Company Income Tax (CIT)
3. Value Added Tax (VAT)
4. Withholding Tax (WHT)
5. Petroleum Profit Tax (PPT)
6. Capital Gains Tax (CGT)
7. Stamp Duties (SD)
8. Tertiary Education Tax
9. National Information Technology Development Levy (NITDL)

1. Personal Income Tax

Personal Income Tax (“PIT”) is a type of tax levied on the income, earnings and wages of individuals, including those employed, self-employed as well as trustees and executors. PIT is a progressive tax collected by the State Inland Revenue Service of the jurisdiction in which the payer resides, irrespective of the institutions or bodies they work for which could be the federal, state or local governments or private organizations as seen in the case of  Cadbury Nigeria Plc v. Federal Board of Inland Revenue[10].

Exceptions include members of the Nigeria Police, Armed Forces, residents of the Federal Capital Territory (FCT), and non-residents earning income in Nigeria, whose PIT is administered by the Federal Inland Revenue Service (FIRS).[11]

Employed individuals pay PIT through the Pay-As-You-Earn (PAYE) system, where employers deduct tax monthly from salaries and remit it to the relevant tax authority. Self-employed individuals pay PIT via direct assessment, filing returns and paying tax themselves.

Residency is the principal basis for PIT liability. A person is considered resident if physically present in Nigeria for at least 183 days in any 12-month period or serving as a Nigerian diplomat abroad.[12] This residency-based approach was upheld in Shell Petroleum Development Company v. Federal Board of Inland Revenue[13], confirming that physical presence and income source are key for PIT liability.

Personal Income Tax is guided by the Personal Income Tax Act 2011[14] and the due date for filing returns of the tax is 31st March of every year. The due date for remittance of PAYE is the 10th day of every succeeding month. An employer shall file a return of emoluments and tax deducted from the employees in the preceding year not later than 31st January of every year.

Types of payment system

• Pay-As-You-Earn (PAYE): Employers deduct tax monthly from employees’ salaries and remit to the relevant State Inland Revenue Service.
• Direct Assessment: Self-employed individuals file returns and pay tax directly.

Filing Deadlines: PAYE returns by January 31; Direct Assessment by March 31 annually.

Reliefs: Consolidated Relief Allowance of ₦200,000 or 1% of gross income plus 20% of gross income. Minimum tax of 1% applies for incomes below ₦300,000.

Penalties: Failure to file attracts fines (N5,000 plus N100/day) or imprisonment; employers face fines up to N500,000.  In Nigerian Breweries Plc v. Abia State Board of Internal Revenue[15] and Citibank Nigeria Ltd v. Lagos State Board of Internal Revenue[16], where the Tax Appeal Tribunal held that employers are liable for penalties if they fail to remit PAYE deductions, and that penalties accrue only after assessments are final.

Note: PIT is remitted to the relevant State Inland Revenue Service except for certain federal employees and non-residents, who pay to the Federal Inland Revenue Service (FIRS)[17]

The newly enacted Nigeria Tax Act, 2025 introduces significant changes to PIT:

• Tax Exemption Threshold: Individuals earning ₦800,000 or less annually are exempt from paying PIT, a substantial increase from the previous threshold of ₦300,000. This change effectively exempts most minimum wage earners from income tax, providing relief to low-income Nigerians.[18]
• Broadening the Tax Base: The Act mandates financial institutions to report individuals with monthly cumulative transactions exceeding ₦25 million, enhancing tax compliance among high-income earners.
• Simplification and Harmonization: The NTA consolidates multiple tax laws to streamline administration and improve compliance across federal, state, and local governments[19].
• Relief for Small Businesses: Small businesses with annual turnover below ₦50 million are exempted from income tax, and withholding tax deductions on their business income are waived, reducing compliance burdens. [20]

These reforms aim to make the tax system more equitable, efficient, and growth-oriented while expanding the tax net to include previously untaxed high-income earners[21]

2. Company Income Tax

Company Income Tax (CIT) is a major source of revenue collected by the Federal Inland Revenue Service (FIRS) in Nigeria. It is imposed on the profits of all companies incorporated in Nigeria and is chargeable on profits that accrue in, are derived from, brought into, or received in Nigeria. An example of a body that is exempt from CIT are Cooperative Societies. Also, companies that carry out petroleum activities. Companies liable to Petroleum Profit Tax are not liable to Company Income Tax on the same income. These activities are regulated and covered by the Petroleum Industry Act 2021.

Companies resident in Nigeria are liable on their worldwide income while non-resident companies are liable on their Nigeria generated income. The administration of Company Income Tax in Nigeria is guided by the Company Income Tax Act 2011[22]

Scope and Residency:

• Nigerian resident companies are taxed on their worldwide income.
• Non-resident companies are taxed only on income derived from Nigerian sources.

Tax Rates: 

• Companies with annual turnover above ₦100 million pay CIT at 30%.
• Companies with turnover between ₦25 million and ₦100 million pay 20%.
• Companies with turnover below ₦25 million are exempt from CIT.

Filing and Compliance:

• Newly incorporated companies must file tax returns within 18 months from incorporation or within six months after the end of their first accounting period, whichever is earlier.
• Existing companies must file within six months after the end of each accounting year.

It is important to note that the filing must follow due process. In ELPER Oilfield Engineering Nigeria Ltd v. Akwa Ibom State Board of Internal Revenue[23], the Tribunal emphasized that tax assessments must follow due process and be based on statutory rates and allowances, not arbitrary calculations[24].

Also, the Tribunal further held in VS  v. Federal Inland Revenue Service[25] that a null and void assessment cannot become final and conclusive, and penalties cannot be enforced on such assessments

The newly enacted Nigeria Tax Act, 2025 introduces significant changes to CIT:

• Turnover Thresholds: The NTA maintains the graduated CIT rates for small, medium, and large companies, reinforcing the exemption for companies with turnover below ₦25 million and the reduced rate of 20% for medium-sized companies (₦25 million to ₦100 million).
• Simplification and Harmonization: The Act consolidates various tax laws, including the Companies Income Tax Act, into a single framework to improve tax administration and compliance.
• Tax Base Expansion: The NTA enhances reporting requirements and compliance measures to broaden the tax base and reduce evasion among corporate taxpayers.
• Alignment with Petroleum Industry Act: The NTA clarifies the exclusion of petroleum companies from CIT on petroleum income, consistent with the Petroleum Industry Act 2021.

3. Withholding Tax

Withholding Tax (WHT) is not a standalone tax but a mechanism for the advance collection of income tax which has also been established by the Tax Appeal Tribunal in Investment Holdings Limited v. Federal Inland[26] that WHT is not a separate tax but an advance payment of income tax, and affirmed the FIRS’s authority to administer and collect WHT as part of the income tax regime.

It requires the payer of certain types of income to deduct a specified percentage from payments made to service providers or suppliers and remit this amount to the relevant tax authority. This system helps curb tax evasion by ensuring tax is collected at source[27].

WHT applies to payments such as contracts, dividends, interest, rent, consultancy fees, and other specified transactions. The deducted tax must be remitted within 21 days after the end of the month in which the payment was made. Tax withheld from corporate entities is remitted to the Federal Inland Revenue Service (FIRS), while tax withheld from individuals, partnerships, and enterprises is remitted to the relevant State Inland Revenue Service.

Failure to deduct or remit WHT attracts a penalty of 10% of the amount not deducted or remitted.

Rates:

• 5% on contracts (supplies, construction).
• 10% on dividends, interest, rent (companies).
• 10% on consultancy, management fees (companies); 5% for individuals.
• Different rates apply for non-residents, police, military, and foreign affairs officers.

Recent Reforms and the 2024 WHT Regulations

The Deduction of Tax at Source (Withholding) Regulations, 2024, effective from January 1, 2025, modernize Nigeria’s WHT system. Key features include:

• Introduction of a 2% WHT rate on sales of goods by Nigerian businesses, excluding goods manufactured or supplied directly by producers, to reduce tax burdens on manufacturers and farmers.[28]
• Exemption of small businesses and unincorporated entities with turnover below ₦25 million from WHT deduction under certain conditions, such as having a valid Tax Identification Number (TIN) and transaction values below ₦2 million monthly.[29]
• Clarification and expansion of exemptions for manufacturers, producers, and farmers to support critical economic sectors.
• Enhanced compliance requirements, including electronic submission of supplier schedules and issuance of tax credit certificates.
• Penalties for non-compliance include fines starting at ₦25,000 for the first month of default and ₦5,000 for each subsequent month.[30] In Lagos State Board of Internal Revenue v. XYZ Ltd[31], the Tribunal held that failure to deduct and remit WHT attracts liability for the principal tax, interest, and penalties as provided under the relevant tax laws.[32]

The newly enacted Nigeria Tax Act, 2025 complements these regulations by consolidating tax laws and reinforcing WHT as a key tool for tax collection. The NTA emphasizes:

• WHT as an advance payment of income tax, ensuring timely revenue flow to government agencies.
• Measures to ease compliance for small and medium enterprises (SMEs) to foster growth and reduce administrative burdens.
• Broadening the tax base through improved reporting and enforcement mechanisms.[33]

4. Value Added Tax

Value Added Tax (VAT) is an indirect tax levied on the consumption of goods and services. It is charged at each stage of production and distribution, making it a multi-stage tax applied on the value added at every point in the supply chain from initial production to final sale. The Court of Appeal in Stabilini Visinoni Limited v. Federal Board of Inland Revenue[34] affirmed that VAT is a multi-stage, consumption-based tax, and clarified the scope of the Act in Nigeria.

The standard VAT rate in Nigeria is currently 7.5%.[35] Some goods/services are zero-rated or exempt e.g., basic food items, medical supplies and exported services, while exempt items cover plants and machinery used in export processing zones, books, educational materials, and specific medical products. In Federal Inland Revenue Service v. CNOOC Exploration & Production Nigeria Ltd[36], the Tribunal clarified the scope of VAT exemptions, particularly for exported services and zero-rated items.

VAT in Nigeria is governed by the Value Added Tax Act.[37]   As amended by the Finance Act 2023. A key amendment to Section 14(3) empowers the Federal Inland Revenue Service (FIRS) to appoint persons to withhold or collect VAT and mandates that the withheld tax must be remitted by the 14th day of the following month in the currency of the transaction. The new provision states that

Penalties apply for failure to register for VAT or remit collected VAT, including fines and other sanctions. The Tax Appeal Tribunal in Vodacom Business Nigeria Ltd v. Federal Inland Revenue Service[38] upheld the imposition of penalties for late VAT filing and remittance, reinforcing the importance of timely compliance.

The primary purpose of VAT is to broaden the tax base by taxing consumption rather than income, thereby providing a stable revenue stream for the government.

Recent Legislative Developments in the newly enacted Nigeria Tax Act, 2025

• The Nigerian Senate rejected proposals to increase VAT from 7.5% to 10% or higher, retaining the current rate of 7.5% as of early 2025. This decision was part of the broader review of the Tax Reform Act aimed at modernizing Nigeria’s tax system while balancing economic considerations.
• The Nigeria Tax Reform Laws, 2025 include the Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill, which collectively consolidate and streamline Nigeria’s tax laws.
• The Finance Act 2023 and the NTA emphasize improved VAT collection mechanisms, including electronic filing and remittance systems such as FIRS VAT-Collect, which facilitates real-time VAT remittance by sectors like domestic airlines and retailers.
• Non-resident digital companies providing services to Nigerian customers are required to charge, collect, and remit VAT to FIRS in the currency of the transaction, reflecting Nigeria’s effort to tax the digital economy.

5. PETROLEUM PROFIT TAX

Petroleum Profit Tax (PPT) is a tax levied on the profits derived from petroleum operations by companies engaged in upstream oil and gas exploration and production in Nigeria.

PPT Rates

The applicable PPT rates vary depending on the nature of the petroleum operation:

• 30% for upstream gas profits.
• 50% for petroleum operations under Production Sharing Contracts (PSC) with the Nigerian National Petroleum Corporation (NNPC).
• 75% for non-PSC operations, including Joint Ventures (JVs), in the first five years of operation during which the company has not fully paid off all pre-production capitalized expenditure.
• 85% for Joint Ventures and Sole Risk Companies after the first five years of operation.

Current holders of Oil Mining Licenses (OML) and Oil Prospecting Licenses (OPL) continue to be taxed under the Petroleum Profits Tax Act (PPTA) unless they execute a conversion contract in accordance with the Petroleum Industry Act (PIA) 2021.[39]

Filing and Compliance

• Estimated tax returns must be submitted no later than two months after the commencement of the accounting period.
• Final tax returns are due within five months after the accounting period ends.
• Late submission attracts a penalty of ₦10,000 plus ₦2,000 for each day of continued default.
• Any unpaid tax instalment on the due date incurs a penalty of 10% and interest at the prevailing minimum rediscount rate set by the Central Bank of Nigeria.

In Pillar Oil Ltd vs. FIRS[40], the court upheld the Federal Inland Revenue Service’s (FIRS) use of official fiscal prices from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to calculate PPT, rejecting the company’s under-declaration. The judgment reinforced anti-avoidance provisions under Section 23 of the PPTA to prevent under-reporting of oil prices and profits.

Recent Developments and Reforms

• The Petroleum Industry Act 2021 introduced significant reforms, including the option for OPL and OML holders to convert to Production Sharing Contracts or Petroleum Prospecting Licences/Mining Leases, affecting their tax regime.
• The Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025, signed into law on April 30, 2025, provides tax credits to companies achieving cost reduction targets, enhancing competitiveness in the sector. Eligible companies can claim tax credits equal to 50% of cost savings, capped at 20% of tax liability, usable within three years.
• The Nigerian Tax Act (NTA) 2025, harmonizes tax laws and reinforces compliance mechanisms for PPT alongside other corporate taxes.

Renovation in the Nigerian Tax Act (NTA) 2025

The NTA introduces notable improvements and changes concerning Petroleum Profit Tax (PPT), aiming to modernize and streamline the fiscal framework for the petroleum sector. Key enhancements include:

• Consolidation and Harmonization: The NTA repeals the Petroleum Profits Tax Act (PPTA) and integrates its provisions into a unified tax legislation covering all tax types, including PPT, hydrocarbon tax (introduced by the Petroleum Industry Act 2021), and other petroleum-related fiscal matters. This consolidation simplifies compliance and administration[41]
• Transfer of Fiscal Administration: The NTA transfers fiscal administration duties such as royalty and petroleum profit tax collection from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to the Nigeria Revenue Service (NRS), i.e., the Federal Inland Revenue Service (FIRS). This aims to enhance revenue collection efficiency, reduce collection costs, and improve enforcement[42].
• Increased Deductions and Clarifications: The Act relaxes the criteria for deductible expenses, allowing companies to deduct all expenses wholly and exclusively incurred in producing income, removing the previous requirement that expenses be “necessarily and reasonably incurred.” This aligns Nigeria’s tax regime more closely with international standards, potentially reducing taxable profits and encouraging investment[43]
• Tax Incentives for Gas and Petroleum Investments: The NTA includes provisions granting tax exemptions and incentives to encourage investment in associated and non-associated natural gas projects, supporting Nigeria’s energy transition and economic diversification goals.
• Development Levy Harmonization: The Act consolidates various levies (e.g., tertiary education tax, NASENI levy, IT levy) into a single development levy, which will progressively decline over time. This harmonization affects companies in the petroleum sector as well, simplifying their tax obligations[44].
• Cost Efficiency Incentives: Although not directly part of the NTA, the Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025, signed into law in April 2025, complements the reforms by providing tax credits for companies achieving cost reduction targets, enhancing competitiveness in the sector[45].

6. Capital Gains Tax

Capital Gains Tax (CGT) is a tax imposed on the profit realized from the sale or exchange of chargeable assets such as land, buildings, shares, stocks, and securities. In Nigeria, CGT is currently charged at a flat rate of 10% on the gain made from the disposal of qualifying assets. Chargeable assets include all forms of property situated both within and outside Nigeria.

The Court of Appeal in FIRS v. CNOOC & Others[46] confirmed that the Tax Appeal Tribunal has jurisdiction over CGT disputes, with appeals to the Federal High Court.

Capital Gains Tax in Nigeria is governed by the Capital Gains Tax Act.[47] However, recent amendments under the Finance Act 2021 expanded CGT to cover gains from the disposal of shares in Nigerian companies when the gross proceeds from such disposals exceed ₦100 million within any 12 consecutive months. Gains on portions of proceeds reinvested in shares within the same year of assessment are exempt from tax.

In Sahara Energy Exploration and Production Limited v. Lagos State Internal Revenue Service[48], the Tax Appeal Tribunal (TAT) ruled that CGT applies on gains arising from the sale or assignment of participating interests in oil fields, even before commencement of petroleum operations. The ruling confirmed that gains from disposals of rights in oil fields are subject to CGT.

A significant innovation introduced by the Finance Act 2023 is the taxation of capital gains arising from transactions involving digital assets, such as cryptocurrencies, at the same 10% rate.

Exemptions: Awards for valour, life insurance policies, Nigerian government securities, and certain stocks/shares.

Renovation under the Nigerian Tax Act (NTA) 2025

The NTA, provides transformative changes to Nigeria’s CGT regime:

• Alignment with Corporate Income Tax (CIT) Structure: Instead of a flat 10% rate, CGT will be taxed at the same rates applicable to the total profits of a taxable person. This means CGT could rise to 27.5% for companies (matching the proposed CIT rate for 2025), increasing tax liabilities especially for corporate and non-resident investors.
• Expansion to Indirect Transfers: The Act broadens CGT’s scope to include indirect transfers of shares and other interests deriving value from Nigerian assets, targeting offshore exits, intra-group restructurings, and holding company strategies.
• Compliance Obligations: Non-resident persons creating a permanent establishment or significant economic presence in Nigeria through business activities (excluding mere shareholding) will face CGT filing and reporting requirements, including submission of audited accounts.
• Closing Avoidance Loopholes: These reforms align Nigeria’s CGT regime with international tax standards, aiming to prevent tax avoidance and capture gains linked to Nigerian economic interests more effectively

7. Stamp Duties

Stamp Duty is an indirect tax imposed on written or electronic legal instruments such as cheques, receipts, bills of exchange, contracts, and other documents. It is regarded as an indirect tax in Nigeria governed by the Stamp Duties Act (SDA)[49]. Charged for a stamp or seal applied on a written or electronic document which if executed, makes it a legal document, admissible in any court of law. Summarily, they are taxes paid on written and electronic instruments or documents relating to an act performed or required to be performed in Nigeria.

Under the Finance Act 2019, Electronic receipts or transfers above ₦10,000 will attract a one-off stamp duty of ₦50. However, the duty will not apply to transfers or payments into accounts owned by the same person within the same bank and to salary accounts.

The courts have repeatedly held that there was no express provision in the Stamp Duties Act authorizing the deduction of ₦50 as stamp duty on teller deposits or electronic transfers prior to the 2019 amendment. In 2017, the Court of Appeal in Standard Chartered Bank Nigeria Ltd v. Kasmal International Services Ltd & Ors[50], held that there was no legal basis for deducting ₦50 stamp duty on bank deposits or teller transactions under the Stamp Duties Act prior to its amendment. Also, in Retail Supermarkets Nigeria Ltd v. Citibank Nigeria Ltd & Central Bank of Nigeria[51], the court declared CBN’s directive on ₦50 stamp duty deduction on teller deposits and electronic transfers unlawful and nullified the CBN circular.

According to Section 4(1) Stamp Duty Act as amended by S.53 of the Finance Act 2019, the FIRS is the sole regulatory agency for the administration of Stamp Duties in Nigeria as regards assessing, collecting and stamping of instruments between a company and an individual, group or body of individuals and accounts for such revenues.

In practice, the administration of Stamp Duties is carried out by the FIRS, FCT and respective State Internal Revenue Services (IRS). In Unity Bank Plc v. Abia State Internal Revenue Service[52], the Tribunal confirmed that banks are accountable to the relevant State IRS for stamp duty on transactions between individuals’ resident in the state.

Recent Updates

• Under the Finance Act 2019, electronic receipts or transfers above ₦10,000 attract a one-off stamp duty of ₦50. However, this does not apply to transfers within the same bank account or salary accounts.
• Stamp duty rates vary by document type and transaction value, typically charged as either a flat rate or ad valorem (percentage of transaction value). For example:
• Contract agreements attract 1% ad valorem duty.
• Certificate of Occupancy has a flat rate of ₦1,000.
• Electronic stamps range from ₦50 to ₦1,000 depending on the document.
• Bulk transactions and high-value contracts often benefit from reduced rates to encourage compliance.

Payment and Compliance

Stamp duty must be paid within 30 to 40 days after execution or receipt of the document in Nigeria. Failure to pay attracts penalties and interest as specified under the Stamp Duty Act.

Also, the FIRS has introduced digital platforms to facilitate stamp duty payments and issuance of electronic stamps, improving efficiency and compliance.

Reform under the Nigerian Tax Act (NTA) 2025

The NTA introduces significant renovations affecting various taxes, including Stamp Duties. Key improvements under the NTA reforms include:

• Consolidation and Harmonization: The NTA consolidates multiple tax laws—including the Stamp Duties Act into a single unified tax legislation, simplifying tax administration and reducing complexity for taxpayers and tax authorities alike.
• Modernization of Administration: The Act establishes the Nigeria Revenue Service (NRS), replacing the Federal Inland Revenue Service (FIRS), to centralize and improve the efficiency of tax assessment, collection, and enforcement, including for stamp duties.
• Enhanced Compliance and Penalties: The NTA increases penalties for non-compliance and introduces clearer filing and payment obligations, which apply to stamp duties as part of the unified tax framework.
• Digitalization and Electronic Transactions: Given the rise of electronic documents and digital transactions, the reforms emphasize electronic filing and payment systems, facilitating easier compliance for stamp duties on electronic instruments such as electronic receipts and transfers (e.g., the ₦50 stamp duty on electronic transfers above ₦10,000).
• Broader Tax Base and Exemptions: The reforms maintain certain exemptions but also clarify the scope of taxable instruments to ensure comprehensive coverage, including digital and electronic documents, aligning with modern commercial practices.
• Development Levy Harmonization: While not directly a stamp duty change, the NTA consolidates various levies (tertiary education tax, NASENI levy, IT levy) into a single development levy, which may indirectly affect companies’ overall tax obligations and compliance burden.

In summary, the NTB’s renovations aim to streamline stamp duty administration by integrating it into a unified tax framework, enhancing digital compliance, increasing penalties for evasion, and improving revenue collection efficiency.

8. Tertiary Education Tax

In line with the Finance Act 2023, Tertiary Education Tax is imposed on the income of all registered companies in Nigeria at a rate of 3% of the assessable profit for each year of assessment and it is in turn used to fund projects in tertiary institutions nationwide.

Funds which are derived from this tax are used to facilitate the rehabilitation, restoration and consolidation of tertiary education in Nigeria by the Tertiary Education Trust Fund (“TETFUND”) and this is done by providing necessary facilities, pieces of equipment and infrastructures to improve the quality of education on campuses across the country.

Funds generated from the Tertiary Education Tax are allocated to public tertiary institutions i.e. universities, polytechnics, and colleges of education—to provide essential infrastructure, equipment, and facilities that improve the quality of education. The distribution ratio is 2:1:1, with universities receiving the largest share, while polytechnics and colleges of education receive equal but smaller portions.

Legal Framework and Compliance

• The tax is primarily governed by the Tertiary Education Trust Fund (Establishment, Etc.) Act 2011
• The Finance Act 2023 increased the TET rate from 2.5% to 3%, effective for accounting periods ending on or after September 1, 2023. [53]
• Filing deadlines for TET returns align with those for Company Income Tax (CIT) and Petroleum Profit Tax (PPT), typically within two months of receiving an assessment notice from the Federal Inland Revenue Service (FIRS).
• Failure to comply attracts penalties: a first offence may result in a fine of ₦1,000,000 or six months imprisonment (or both), while subsequent offences attract a fine of ₦2,000,000 or twelve months imprisonment (or both).

Governance

The TETFund is managed by a thirteen-member Board of Trustees representing Nigeria’s six geopolitical zones and federal ministries[54]. The Board oversees the collection, management, and disbursement of funds, ensuring equitable distribution and monitoring of funded projects.

Impact of the Finance Act 2023

The increase to 3% further raises the tax burden on medium and large companies but is expected to enhance funding for tertiary education infrastructure and development[55].

Companies with accounting year-ends spanning pre- and post-September 1, 2023, must apportion assessable profits accordingly, applying the old rate to pre-September profits and the new 3% rate to post-September profits.[56]

Reform under the Nigerian Tax Act (NTA) 2025

The NTA introduces significant renovations affecting the Tertiary Education Tax (TET) and related levies:

• Consolidation into a Single Development Levy: The NTA consolidates the Tertiary Education Tax, NASENI levy, and the National Information Technology Development Levy (NITDL) into one unified Development Levy. This levy is initially set at 4% of assessable profit in 2025 and 2026 and is designed to progressively decline to 2% by 2030. This consolidation simplifies compliance by replacing multiple levies with a single payment.[57]
• Progressive Decline of Levy Rate: The phased reduction in the development levy rate aims to ease the tax burden on companies over time while ensuring sustained funding for education, technology, and infrastructure development.
• Broader Tax Reform Context: The NTA harmonizes tax administration by establishing the Nigeria Revenue Service (NRS) to replace the FIRS, improving efficiency in collection and enforcement of all taxes, including the development levy.[58]
• Impact on Companies: Companies will no longer pay separate levies for tertiary education and other related funds but will remit the consolidated development levy, streamlining their tax obligations[59].

the NTA reforms tertiary education tax by merging it into a broader development levy, simplifying payments, and providing a clear timeline for rate reductions, which aligns with Nigeria’s broader tax modernization goals.

9. National Information Technology Development Levy (NITDL)

The National Information Technology Development Levy (NITDL) is a type of tax payable by specified companies in Nigeria that have an annual turnover of ₦100 million and above. It is calculated at a rate of 1% of the profit before tax (PBT) of the liable companies.

Companies liable to pay the levy include:

• GSM Service Providers and all Telecommunications Companies in Nigeria,
• Cyber Companies and Internet Providers,
• Pension Managers and Pension related Companies,
• Insurance Companies and
• Banks and other Financial Institutions.

The Levy is governed by the National Information Technology Development Agency Act 2007[60] . Under the act, the FIRS is authorised to assess, collect and remit to the fund created by the National Information Technology Development Agency (NITDA). It is also authorised to impose penalties for offences relating to the default in payment of the levy. The levy is due within six (6) months from the end of the accounting year of an existing taxpayer.

The National Information Technology Development Levy (NITDL) is currently imposed at 1% of profit before tax on specified companies with turnover of ₦100 million and above, including telecoms, cyber companies, pension managers, insurance companies, banks, and financial institutions. It is governed by the National Information Technology Development Agency Act 2007, with FIRS responsible for assessment and collection.

Reform under the Nigerian Tax Act (NTA) 2025

• The NTA repeals the National Information Technology Development Agency Act’s levy provisions and consolidates NITDL with other levies, including the Tertiary Education Tax and NASENI levy, into a single Development Levy[61].
• This Development Levy is initially set at 4% of assessable profit for 2025 and 2026, reducing progressively to 3% (2027–2029) and 2% from 2030 onwards[62].
• The levy applies to all Nigerian companies except small companies and explicitly exempts non-resident companies.[63]
• This consolidation simplifies compliance by replacing multiple levies with one payment, reducing administrative burdens on companies, including those previously liable for NITDL[64].
• The NTA also establishes the Nigeria Revenue Service (NRS) to replace FIRS, centralizing tax administration and improving collection efficiency[65].

The NTB effectively abolishes the standalone NITDL and merges it into a broader, phased Development Levy aimed at streamlining tax obligations and supporting national development funds.

TAX SYSTEMS

Globally, there are three major recognized tax systems:

1. Progressive Tax System: This system is predicated on the principle that the higher an individual earns, the more they should pay in taxes. In a progressive tax system, individuals who earn higher incomes pay a higher percentage of taxes than low-income earners.
2. Regressive Tax System: Just like the word regressive is the opposite of the word progressive, this is the direct opposite of the progressive tax system. Here, individuals who earn less pay a higher percentage in taxes than high-income earners.
3. Proportional Tax System: This is a balanced tax system. In the proportional tax system, the same percentage of taxes is paid by all categories of income earners.

THE CURRENT TAX CAPE: A MULTI-TIERED SYSTEM

Nigeria operates a federal tax system, with three distinct levels of government – federal, state, and local empowered to levy specific taxes within their jurisdictions. The primary tax authority, the Federal Inland Revenue Service (FIRS), oversees the assessment, collection, and accounting of federally collected taxes (Federal Inland Revenue Service Act, Cap. F40 LFN 2004, Section 2(1). ^[66] Here’s a breakdown of the key players:

Key Tax Authorities

1. Federal Inland Revenue Service (FIRS): The primary federal tax authority responsible for assessing, collecting, and accounting for federal taxes (Federal Inland Revenue Service Act, Cap. F40 LFN 2004, Section 2(1)).
2. State Inland Revenue Boards: Responsible for state-level taxes.
3. Local Government Revenue Authorities: Handle taxes at the local government level.
4. Joint Tax Board: Advises on tax policy, harmonizes tax administration across states, and prevents double taxation.
5. Federal Taxes Administered by FIRS
   1. Company Income Tax (CIT): A tax levied on the profits of companies registered in Nigeria, currently at a rate of 30% (Section 21(1), Companies Income Tax Act, Cap. C21 LFN 2004).²

Note: The NTA provides a gradual reduction to 27.5% in 2025 and 25% in 2026[67].

1. Personal Income Tax (PIT): A progressive tax on individual income, with graduated rates ranging from 7% to 24% (Personal Income Tax Act, Cap. P8 LFN 2004, Section 1(2)).
2. Value Added Tax (VAT): A consumption tax imposed on the value added to goods and services at each stage of production and distribution. The standard VAT rate stands at 7.5% (Value Added Tax Act, Cap. V1 LFN 2004, Section 1). The NTA provides phased increases to 10% in 2025, 12.5% (2026–2029), and 15% from 2030 onwards.
3. Nigeria Customs Service (NCS): Levied on imported and exported goods by the Nigeria Customs Service (Nigeria Customs Service Act, Cap. N85 LFN 2004).

2. Taxes Administered by State and Local Governments
   1. Payroll Taxes: Imposed on wages and salaries within their jurisdiction.
   2. Property Taxes: Levies on land and buildings.
   3. Market Taxes: Taxes on activities within designated markets

Nigeria’s tax administration aligns with its political structure, involving:

• Federal Board of Inland Revenue (now transitioning to Nigeria Revenue Service under NTB)
• State Inland Revenue Boards
• Local Government Revenue Authorities

Employers are responsible for deducting and remitting Pay-As-You-Earn (PAYE) taxes monthly to the relevant State Internal Revenue Service where employees reside. Annual returns must be filed by employers (by January 31) and employees (by March 31).

Reform under the Nigerian Tax Act (NTA) 2025

• Nigerian Tax Act, aims to consolidate and harmonize tax laws, replace FIRS with the Nigeria Revenue Service (NRS), and introduce a collaborative framework among federal, state, and local tax authorities[68].
• The NTA provides a gradual reduction in CIT rates from 30% to 27.5% in 2025 and 25% in 2026.
• VAT rates are set to increase progressively, with a new revenue-sharing formula prioritizing states where VAT is generated.
• Enhanced compliance measures include stricter tax registration protocols, introduction of advance pricing agreements (APAs), and adjustments to withholding tax rates[69].
• The NTA introduces a Development Levy to replace multiple levies (e.g., tertiary education tax, IT levy), simplifying tax obligations for companies.

PRINCIPLES OF AN EFFECTIVE TAX SYSTEM

An effective tax system is fundamental to sustainable revenue generation and economic growth. To achieve this, tax laws and administration should adhere to several key principles:

1. Convenience

Taxation should be levied and collected in a manner that minimizes the compliance burden on taxpayers. For example, Section 80 of the Personal Income Tax Act (PIT Act) introduces the Pay-As-You-Earn (PAYE) system, which deducts tax at source from an individual’s income, simplifying payment. Similarly, Company Income Tax (CIT) is payable annually after the company finalizes its accounts. Modern tools such as online tax calculators and e-filing platforms provided by the Federal Inland Revenue Service (FIRS) and Lagos Internal Revenue Service (LIRS) enhance convenience, making it easier for taxpayers to compute and remit their taxes promptly.

2. Certainty

Tax laws should be clear, comprehensive, and unambiguous to prevent exploitation or misinterpretation by tax authorities. The proportion, timing, and mode of payment must be explicitly stated to encourage compliance. Courts have generally interpreted ambiguous tax provisions in favour of the taxpayer, as exemplified in the case of Brandy Syndicate v. IRC.

3. Administrative Efficiency

Effective tax laws require efficient administration. Tax authorities must be well-staffed, properly equipped, and cost-effective in enforcing tax laws and collecting revenues. Without competent administration, even well-designed tax laws may fail to achieve their objectives.

4. Simplicity

Tax laws should be straightforward and easy for the average citizen to understand. Complex tax codes discourage compliance and increase administrative costs.

5. Flexibility and Stability

A good tax system must be adaptable to the changing economic and social environment while maintaining stability to provide certainty for taxpayers and government planning.

6. Neutrality

Tax laws should be impartial and not favour certain groups over others. They must not be used as tools for political vendettas or oppression but should apply fairly to all taxpayers.

IMPORTANCE OF TAXATION IN NIGERIA

Taxation plays a vital role in the economic development of Nigeria and countries worldwide. Its importance can be summarized as follows:

1. Revenue Generation: Taxes are the primary source of government revenue, providing sustainable funding for governance, public services, social programs, and national development projects. Petroleum taxation, in particular, contributes significantly to Nigeria’s revenue.
2. Infrastructural Development: Tax revenues fund critical infrastructure projects such as roads, hospitals, schools, and power supply, which create jobs, stimulate economic activity, and reduce poverty.
3. Promotes Civic and Social Responsibility: Taxation fosters patriotism and civic responsibility among citizens as a direct contribution to nation-building. It also encourages corporate social responsibility among businesses.
4. Tax Compliance Benefits: The Federal Inland Revenue Service (FIRS) accords benefits, rights, and privileges to compliant taxpayers, while non-compliance attracts penalties. Compliance helps individuals and businesses avoid sanctions and promotes a culture of tax discipline.
5. Educational Support and Development: Through the Tertiary Education Tax, the government uses funds generated from the payment of taxes to finance infrastructural projects in Universities, Polytechnics and Colleges of Education nationwide with the Tertiary Education Trust Fund (TETFUND) to improve the quality of education within the country.
6. Stabilization of the Economy: Taxation enables the government to monitor economic performance and implement policies that foster growth and stabilize the economy.
7. Redistribution of Wealth and Job Creation: Tax revenues help bridge income disparities by funding social programs and infrastructure projects that create employment opportunities, thereby reducing unemployment and poverty.
8. Stimulating Economic Growth: Studies show a positive correlation between tax compliance and economic development in Nigeria. For example, Value Added Tax (VAT) has been found to significantly contribute to GDP growth and government revenue, supporting economic expansion.

CHALLENGES OF TAXATION IN NIGERIA

1. Complex and Fragmented Tax System: Multiple taxes imposed by federal, state, and local governments lead to overlapping obligations, complicating compliance and increasing costs for businesses.
2. High Corporate Tax Rates: Although reduced for small and medium enterprises (SMEs), large companies still face a 30% corporate income tax rate—one of the highest in Africa—which can discourage investment.[70]
3. Multiple Taxation and Compliance Burden: Businesses often pay taxes to several authorities, increasing administrative burdens and discouraging formalization.
4. Tax Reform Implementation: Efforts to improve revenue collection, such as replacing FIRS with the Nigerian Revenue Service (NRS) and introducing minimum top-up taxes, face bureaucratic delays and capacity constraints.[71]
5. Tax Dispute Resolution: Heavy reliance on domestic courts for tax disputes prolongs resolution and creates uncertainty, with limited use of international arbitration mechanisms.[72]
6. Economic and Fiscal Pressures: Inflation, debt, and volatility in oil revenues complicate tax policy effectiveness and enforcement.
7. Revenue Leakages and Corruption: Inefficiencies and corruption in tax collection reduce effective mobilization of revenues, impacting government budgets and service delivery.[73]
8. Digital Economy Taxation: New rules taxing foreign digital companies have increased revenue but raised concerns about higher consumer costs and enforcement complexities.
9. Corruption, waste, and mismanagement of tax revenues undermine the potential benefits of taxation, leading to persistent poverty and underdevelopment.

CONSEQUENCES OF THE SHORTCOMINGS IN NIGERIA’S TAXATION SYSTEM

1. Revenue Loss: Tax evasion and avoidance lead to substantial losses in government revenue, limiting funds available for public spending, infrastructure, and development projects[74]
2. Economic Distortion: Multiple taxation and high compliance costs discourage investment, reduce business expansion, and increase the cost of doing business, ultimately lowering economic growth and job creation[75]
3. Business Failures and Informality: The complex tax system and heavy tax burden cause many businesses to close or operate informally to avoid taxes, reducing the tax base and economic formalization[76]
4. Inefficient Public Services: Reduced tax revenue due to evasion and leakages undermines government capacity to deliver essential services and maintain infrastructure, affecting overall development
5. Increased Corruption and Distrust: Corruption within tax administration fosters distrust among taxpayers, further fuelling non-compliance and reducing voluntary tax payments.
6. Revenue Leakage and Inequity: The fragmented tax system and lack of coordination among federal, state, and local governments result in revenue leakages and unfair tax burdens on compliant taxpayers, especially SMEs[77].
7. Economic Inefficiency: The burden of multiple taxes and unofficial payments distorts factor incomes and discourages productivity-enhancing investments, limiting competitiveness in domestic and global markets

A ROADMAP TO A SUSTAINABLE TAX SYSTEM

Building a sustainable tax system requires a multi-faceted approach combining policy reforms, administrative improvements, and technological innovation. Key recommendations include:

Implement a comprehensive tax reform package:

• Broaden the tax base by bringing more individuals and businesses into the tax net.
• Simplify the tax code to reduce complexity and eliminate duplication.
• Rationalize tax rates to balance revenue generation with economic growth.
• Diversify revenue sources beyond oil to enhance fiscal stability.

Invest in capacity building for tax authorities:

• Train tax officials in modern tax administration and technological tools.
• Foster a culture of professionalism and accountability within tax agencies.
• Equip agencies with adequate resources to enforce tax laws effectively.

Promote public awareness and tax education:

• Educate citizens on their tax obligations and the benefits of tax compliance.
• Build trust through transparency and consistent communication.
• Encourage voluntary compliance by highlighting taxpayer rights and incentives.

Strengthen intergovernmental collaboration:

• Enhance cooperation between federal, state, and local tax authorities.
• Share information and coordinate enforcement to reduce tax evasion and duplication.
• Establish joint initiatives to streamline tax administration across all levels.

Leverage technology for enhanced efficiency:

• Implement e-filing and e-payment platforms to simplify tax processes.
• Use data analytics and digital tools to identify non-compliance and improve revenue collection.
• Develop integrated tax systems for seamless interaction between taxpayers and authorities.

Recent Developments Supporting This Roadmap

• Nigerian Tax Act 2025, consolidate fragmented tax laws into a harmonized framework.
• The Act establish the Nigeria Revenue Service (NRS) to replace the Federal Inland Revenue Service (FIRS), enhancing efficiency and coordination.
• Provisions include phased reductions in corporate income tax rates, retention of VAT at 7.5%, and introduction of a top-up tax to ensure large companies pay a minimum effective tax rate.
• The reforms aim to reduce taxpayer compliance burdens, improve ease of doing business, and boost domestic and foreign investment.

IS NIGERIA’S TAX SYSTEM A TOOL OF DEVELOPMENT OR OPPRESSION?

Nigeria’s tax system has the potential to be a tool for development by generating revenue to fund public goods and socio-economic programs, as envisioned in the Constitution and National Tax Policy[78]. However, due to challenges like tax evasion, poor administration, corruption, and inequitable tax burdens, it often feels oppressive to compliant taxpayers, especially in the formal sector, while failing to adequately harness resources from wealthier or informal sectors[79]. Thus, the system currently oscillates between development and oppression, depending on governance quality and policy implementation.

Tool of development—Ideally, taxation should be a tool for redistributive justice and sustainable development. When revenues are well-managed, they fund infrastructure, public services, and national growth.

Tool of oppression—In practice, for many Nigerians, especially the poor and small business owners:

Taxation is seen as exploitative, due to arbitrary levies, corruption, harassment, and lack of value-for-money. There’s a disconnect between tax contributions and public service delivery, fuelling resentment and evasion.

HOW IS TAXATION USED (OR ABUSED) AT FEDERAL, STATE, AND LOCAL LEVELS?

1. Federal Level:

• Taxes like VAT, customs duties, and companies’ income tax are collected and shared among the tiers of government.
• While revenue is sometimes used for national development, there are frequent reports of mismanagement, corruption, and opaque spending.

2. State Level:

• States collect personal income taxes, levies, and occasionally VAT (controversially, as in Rivers vs. FIRS).
• Many states prioritize revenue generation without corresponding public service delivery, and multiple, sometimes illegal, taxes are imposed on residents.

3. Local Government Level:

• Typically collect rates, tenement taxes, and market levies.
• Abuse is rampant at this level, with cases of extortion by untrained or non-statutory tax collectors, often without receipts or accountability
• Thus, rather than being a tool for development, taxation at various levels is often used as a revenue-extraction mechanism with little accountability.

WHO BEARS THE TAX BURDEN IN PRACTICE AND WHO ESCAPES IT?

In practice, the tax burden in Nigeria disproportionately falls on:

• Salaried workers: Whose income taxes are automatically deducted at source through Pay-As-You-Earn (PAYE) systems.
• Small and medium enterprises (SMEs): Often over-regulated and multiple-taxed by local and state authorities.
• Consumers: Indirect taxes like VAT, customs duties, and levies are passed down through higher prices.
• Those who typically escape the tax net include:
• Large informal sector operators: Which make up over 60% of Nigeria’s economy and often evade taxes due to poor enforcement.
• High-net-worth individuals and corporations: Some exploit weak regulatory systems, poor data tracking, and legal loopholes to avoid or under-declare taxes.
• Politically connected entities: Some benefit from arbitrary waivers or lax enforcement.

This results in a regressive tax structure, where the lower and middle classes bear more financial pressure relative to their income

WHAT IS THE LEGAL BASIS OF TAXATION IN NIGERIA? IS IT IN LINE WITH CONSTITUTIONAL EXPECTATIONS?

The legal basis of taxation in Nigeria is rooted in the 1999 Constitution (as amended) and several tax-specific statutes. Key legal foundations include:

Section 4 of the 1999 Constitution: Grants legislative powers to the National Assembly to make laws on taxation matters within the exclusive and concurrent legislative lists.

Items 58 & 59 of the Exclusive Legislative List (Part I, Second Schedule): Empower the federal government to impose taxes on incomes, profits, and capital gains.

Items in the Concurrent Legislative List: Allow both federal and state governments to legislate on certain taxes (e.g., stamp duties).

Other critical tax laws include: Personal Income Tax Act (PITA), Companies Income Tax Act (CITA), Value Added Tax Act (VATA), Customs and Excise Management Act, Stamp Duties Act, Federal Inland Revenue Service (Establishment) Act

While the structure aligns with constitutional principles of federalism and legislative competence, overlaps and ambiguity—particularly between federal and state taxation powers (e.g., VAT disputes)—have created friction and legal challenges, calling for clearer delineation and harmonization.

REFORMATION

To build a more effective and equitable tax system, Nigeria must focus on the following reform priorities:

1. Broadening the tax base:

• Formalize the informal sector by simplifying registration and compliance processes.
• Ensure high-net-worth individuals and large corporations pay their fair share of taxes through improved identification and enforcement.

2. Simplifying the tax system:

• Harmonize tax rates across federal, state, and local governments to reduce complexity and prevent multiple or overlapping taxation.
• Streamline tax laws to eliminate ambiguities and contradictions.

3. Strengthening institutions:

• Enhance the autonomy of tax agencies such as the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services (IRS).
• Invest in digital infrastructure and capacity to improve tax administration, data management, and taxpayer services.

4. Legal clarity:

• Resolve conflicts over tax jurisdiction between federal and state governments, particularly regarding Value Added Tax (VAT), through clear legislation or constitutional amendments.
• Establish definitive rules to prevent disputes and ensure smooth tax collection.

5. Civic education:

• Promote public awareness campaigns to improve tax morale and educate citizens on their tax obligations and rights.
• Foster a culture of voluntary compliance by highlighting the link between taxes paid and public services received.

6. Transparency and accountability:

• Publish detailed reports on tax revenue collection and expenditure.
• Link tax revenues to visible public benefits such as infrastructure development, healthcare, and education to build taxpayer trust.

CONCLUSION

Nigeria’s tax system stands at a pivotal crossroads, shaped by a complex history of multi-tiered taxation, evolving economic realities, and pressing challenges. As this article has highlighted, taxation remains an indispensable tool for revenue generation, infrastructural development, social equity, and economic stabilization. However, issues such as tax fragmentation, compliance burdens, high corporate rates, and administrative inefficiencies have limited the system’s full potential.

The Nigerian Tax Act 2025 represents a landmark opportunity to transform this landscape by harmonizing tax laws, simplifying administration, broadening the tax base, and enhancing compliance mechanisms. Through the NTA’s provisions—such as phased corporate tax reductions, VAT adjustments, the introduction of a unified development levy, and the establishment of the Nigeria Revenue Service—Nigeria is poised to build a more transparent, efficient, and growth-oriented tax framework.

For Nigeria to realize the full benefits of these reforms, concerted efforts must continue in capacity building, technological adoption, legal clarity, and public engagement. A sustainable tax system is not only about collecting revenue but also about fostering trust, fairness, and shared responsibility among all stakeholders.

In embracing these reforms, Nigeria can unlock greater fiscal resilience, attract investment, and accelerate socio-economic development—laying a strong foundation for a prosperous future.

Oluwaleye Adedoyin Grace writes from the faculty of law Ahmadu Bello University, Zaria, Kaduna State., oluwaleyeadedoyingrace@gmail.com  08106289069 or 08155618455

[1] Sparks, Jared (1856). The writings of Benjamin Franklin. Vol. X (1789 – 1790). Macmillan. p. 410

[2] [1983] 60 CLR 263.

[3] Adams Smith, The Wealth of Nations (6^th edn, Everyman’s Library Ltd 1910) 79.

[4] Nwosu, S.N., Ejinkonye, R.C., Obasi, A.I. & Iregha, M.A., ‘Effect of Taxation on Economic Growth in Nigeria’ (2023) 1118(6828) JGA 279 <https://journals.unizik.edu.ng/joga> accessed 24 March 2024.

[5] Oxford Languages

[6] Charles E. McLure Jr. “Taxation” Britannica.

[7] Understanding the Tax Reform Bills – PLAC Legist available at  https://placng.org/Legist/understanding-the-tax-reform-bills/  accessed on June 25, 2025

[8] President Tinubu’s Tax Reform Bills Under a Microscope – Proshare available at https://proshare.co/articles/president-tinubus-tax-reform-bills-under-a-microscope?menu=Economy&classification=Read&category=Taxes+%26+Tariffs accessed on June 24, 2025

[9] [PDF] ANALYSIS OF THE NIGERIAN TAX REFORM BILLS available at  https://placng.org/i/wp-content/uploads/2025/01/Analysis-of-the-Nigerian-Tax-Reform-Bills.pdf  accessed on June 25, 2025

[10] (2009) 2 NWLR (Pt. 1179) 561

[11] List of taxes in Nigeria available at < https://pml.com.ng/list-of-taxes-in-nigeria /> accessed on June 29, 2025

[12] Worldwide Tax summaries available at  < https://taxsummaries.pwc.com/nigeria/individual/residence > accessed on June 29, 2025

[13] (2001) supreme court (reported in legal journals)

[14] Cap P8 LFN 2004 (as amended)

[15] Unreported judgment of the Tat Appeal Tribunal (TAT), Appeal N0. TAT/SEZ/002/17, delivered June 20, 2019

[16] Unreported judgment of Tax Appeal Tribunal, 2020

[17] PERSONAL INCOME TAX IN NIGERIA – What You Should Know  available at https://taxaide.com.ng/2019/06/20/personal-income-tax-in-nigeria-what-you-should-know/  accessed on June 21, 2025

[18] Ten things to know about Reps’ tax reform bills amendments – Businessday NG available at https://businessday.ng/news/article/ten-tax-reform-bills-amendments-by-house-of-reps/  accessed on June 25, 2025

[19] Nigerian Tax Bill 2024 at a Glance: Highlights and Key Provisions available at https://www.thisdaylive.com/2024/12/18/nigerian-tax-bill-2024-at-a-glance-highlights-and-key-provisions/  accessed on June 25, 2025

[20] The Newly Approved Tax Reform Bill: A Voyage Into The Future Of … available at  https://www.mondaq.com/nigeria/tax-authorities/1618102/the-newly-approved-tax-reform-bill-a-voyage-into-the-future-of-nigerias-tax-allocation accessed on June 25, 2025

[21] Nigerian Tax Bill 2024 at a Glance: Highlights and Key Provisions available at https://www.thisdaylive.com/2024/12/18/nigerian-tax-bill-2024-at-a-glance-highlights-and-key-provisions/ accessed on June 25, 2025

[22] Cap C21 LFN 2004 (as amended)

[23] TAT/SEZ/003/2017 (delivered 8 October 2020),

[24] ELPER OILFIELD ENGINEERING NIG LTD -v- AKWA IBOM STATE … available at https://tat.gov.ng/judgement/details.php?id=154  accessed on June 29, 2025

[25] TAT/LZ/CIT/024/2018 (2019)

[26] TAT/LZ/CIT/024/2020 (Tax Appeal Tribunal, Lagos Zone, 6 August 2022)

[27] Nigeria Withholding Tax Rate – Trading Economics available at  https://tradingeconomics.com/nigeria/withholding-tax-rate accessed on June 20, 2025

[28] Withholding tax (WHT) rates – PwC Tax Summaries available at https://taxsummaries.pwc.com/quick-charts/withholding-tax-wht-rates accessed on June 25, 2025

[29] Nigeria: New withholding tax regulations effective January 1, 2025  available at https://kpmg.com/us/en/taxnewsflash/news/2024/10/tnf-nigeria-new-withholding-tax-regulations-effective-2025.html accessed on June 23, 2025

[30] New withholding tax regime to take effect from January 1st, 2025- FIRS available at  https://nairametrics.com/2024/10/03/new-withholding-tax-regime-to-take-effect-from-january-1st-2025-firs/  accessed on June 25, 2025

[31] TAT/LZ/SEZ/2022 (Tax Appeal Tribunal, 11 August 2023)

[32] LAGOS STATE BOARD OF INTERNAL REVENUE –VS available at  https://tat.gov.ng/judgement/details.php?id=239 accessed on June 29, 2025

[33] Corporate Tax 2025 – Nigeria – Global Practice Guides available at  https://practiceguides.chambers.com/practice-guides/corporate-tax-2025/nigeria/trends-and-developments accessed on June 22, 2025

[34] (2009) 13 TLRN 1 (Court of Appeal)

[35] < https://taxsummaries.pwc.com/nigeria/corporate/withholding-taxes >

[36] TAT/LZ/VAT/022/2016 (Tax Appeal Tribunal, 2018)

[37] Cap V1, LFN 2004 (as amended)

[38] TAT/LZ/VAT/075/2018 (Tax Appeal Tribunal, 2019)

[39] Corporate – Taxes on corporate income  available at < https://taxsummaries.pwc.com/nigeria/corporate/taxes-on-corporate-income > accessed on June 29, 2025

[40] TAT/SEZ/003/2021 (Tax Appeal Tribunal, 2022)

[41] [PDF] ANALYSIS OF THE NIGERIAN TAX REFORM BILLS available at  https://placng.org/i/wp-content/uploads/2025/01/Analysis-of-the-Nigerian-Tax-Reform-Bills.pdf accessed on June 22, 2025

[42] President Tinubu’s Tax Reform Bills Under a Microscope – Proshare available at  https://proshare.co/articles/president-tinubus-tax-reform-bills-under-a-microscope?menu=Economy&classification=Read&category=Taxes+%26+Tariffs  accessed on June 22, 2025

[43] Ibid [29]

[44] The Nigerian Tax Bill 2024 at a Glance: Highlights and Key Provisions available at  https://omaplex.com.ng/the-nigerian-tax-bill-2024-at-a-glance-highlights-and-key-provisions/  accessed on June 22, 2025

[45] Tax & Business Matters – Nigeria: Business Regulations – TypePad available at https://pwcnigeria.typepad.com/tax_matters_nigeria/business-regulations/  accessed on June 22, 2025

[46] Court of Appeal, Appeal No: CA/L/1084/2015, Judgment delivered 5 March 2021

[47] Cap C1 LFN 2004 (as amended)

[48] TAT Appeal No. TAT/LZ/CIT/001/2021 (2022)

[49] CAP S8 LFN 2004 (as amended)

[50] Court of Appeal, CA/L/437A/2014, delivered 21 December 2017

[51]   FHC/L/CS/126/2016, Federal High Court, Lagos, 13 March 2017

[52] TAT/EZ/APP/01/2016, Tax Appeal Tribunal, 13 March 2017

[53] Commencement of the Finance Act 2023: Significant Changes  available at https://www.forvismazars.com/ng/en/services/tax/tax-alerts/finance-act-2023-key-changes accessed on June 25, 2025

[54] Mandate & Objectives – TERTIARY EDUCATION TRUST FUND available at  https://tetfund.gov.ng/index.php/mandate-objectives/ accessed on June 24, 2025

[55] Nigeria | Highlights of Finance Act 2023 – EY Global Tax News available at  https://globaltaxnews.ey.com/news/2023-1056-nigeria-highlights-of-finance-act-2023 accessed on June 25, 2025

[56] [PDF] AN OVERVIEW OF THE FINANCE ACT 2023 available at https://uubo.org/wp-content/uploads/2023/06/AN-OVERVIEW-OF-THE-FINANCE-ACT-2023-1.pdf  accessed on June 25, 2025

[57] [PDF] ANALYSIS OF THE NIGERIAN TAX REFORM BILLS available at https://placng.org/i/wp-content/uploads/2025/01/Analysis-of-the-Nigerian-Tax-Reform-Bills.pdf accessed on June 25, 2025

[58] The Nigerian tax bill 2023 at a glance: Highlights and key provisions …  available at https://www.premiumtimesng.com/opinion/761087-the-nigerian-tax-bill-2023-at-a-glance-highlights-and-key-provisions-by-oyetola-atoyebi.html accessed on June 25, 2025

[59] The Impact of Tax Reforms on Businesses and Individuals in Nigeria available at  https://naltf.gov.ng/the-impact-of-tax-reforms-on-businesses-and-individuals-in-nigeria/ accessed on June 22, 2025

[60] CAP N156 LFN 2004 (as amended)

[61] Nigeria Tax Reform Bills Passed by the Parliament – Deloitte available at https://www.deloitte.com/ng/en/services/tax/perspectives/nigeria-tax-reform-bills-passed-by-the-parliament.html accessed on June 21, 2025

[62] Nigerian Senate Approves 2025 Tax Reform Bills – Orbitax  available at https://orbitax.com/news/archive.php/Nigerian-Senate-Approves-2025–58935  accessed on June 25, 2025

[63] [PDF] Senate Passes Proposed Tax Reform Bills available at https://uubo.org/wp-content/uploads/2025/05/Senate-Passes-Proposed-Tax-Reform-Bills.pdf accessed on June 22, 2025

[64] Ibid[7]

[65] ANALYSIS OF THE NIGERIAN TAX REFORM BILLS available at https://placng.org/i/wp-content/uploads/2025/01/Analysis-of-the-Nigerian-Tax-Reform-Bills.pdf  accessed on June 25, 2025

[66] Federal Inland Revenue Service Act Cap F40 LFN 2004

[67] President Tinubu to Sign Four Tax Bills Into Law Tomorrow available at https://statehouse.gov.ng/news/president-tinubu-to-sign-four-tax-bills-into-law-tomorrow/  accessed on June 27, 2025

[68]  [PDF] Key Trends and Developments in 2024 and Outlook for 2025 available at https://uubo.org/wp-content/uploads/2025/02/Navigating-Nigerias-Tax-Landscape-Key-Trends-and-Developments-in-2024-and-Outlook-for-2025.pdf  accessed on June 25, 2025

[69] Navigating Nigeria’s Tax Landscape: Key Trends And Developments In 2024 And Outlook For 2025 available at https://www.mondaq.com/nigeria/tax-authorities/1579484/navigating-nigerias-tax-landscape-key-trends-and-developments-in-2024-and-outlook-for-2025 accessed on June 28, 2025

[70] [PDF] Key Trends and Developments in 2024 and Outlook for 2025 available at https://uubo.org/wp-content/uploads/2025/02/Navigating-Nigerias-Tax-Landscape-Key-Trends-and-Developments-in-2024-and-Outlook-for-2025.pdf  accessed on June 26, 2025

[71] Corporate Tax 2025 – Nigeria – Global Practice Guides available at https://practiceguides.chambers.com/practice-guides/corporate-tax-2025/nigeria/trends-and-developments

[72] Tax Controversy 2025 – Nigeria – Global Practice Guides https://practiceguides.chambers.com/practice-guides/tax-controversy-2025/nigeria/trends-and-developments accessed on June 27, 2025

[73] Nigeria’s Fiscal Policy 2025: A Strategic Blueprint for Economic … available at https://proshare.co/articles/nigerias-fiscal-policy-2025-a-strategic-blueprint-for-economic-recovery-and-  accessed on June 25, 2025

[74] [PDF] Impact of tax evasion and tax avoidance on government revenue … available at https://uonjournals.uonbi.ac.ke/ojs/index.php/adfj/article/download/2222/1770/ accessed on June 27, 2025

[75] [PDF] Impact of Multiple- Taxation on Competitiveness in Nigeria available at  https://documents.worldbank.org/curated/en/142421468291634393/pdf/638010BRI0Impa00Box0361527B0PUBLIC0.pdf accessed on June 25, 2025

[76] Nigeria’s complex tax system generated unintended consequences  available at https://www.cnbcafrica.com/media/6366116804112/erikume-nigerias-complex-tax-system-generated-unintended-consequences/ accessed on June 27, 2025

[77] [PDF] An Overview of the Imperatives and Challenges of the Nigerian Tax …  available at https://journals.unizik.edu.ng/jcpl/article/download/5612/4659/12799 accessed on June 25, 2025

[78] [PDF] NATIONAL TAX POLICY.pdf – theiGuides Admin available at https://admin.theiguides.org/Media/Documents/NATIONAL%20TAX%20POLICY.pdf  accessed on June 26, 2025

[79] [DOC] TAXATION AND FISCAL REGULATIONS IN NIGERIA available at  https://www.nigeriahc.org.uk/wp-content/uploads/2023/03/TAXATION-AND-FISCAL-REGULATIONS-IN-NIGERIA.doc accessed on June 25, 2025

“History of Rivers State Judiciary: A Compendium of Personalities on the Bench.” Authored by Ampim Gogo Blankson, Esq., Deputy Director at the Rivers State Ministry of Justice, in collaboration with the Rivers State Judiciary 💰 Cover Price: ₦20,000.00 (Twenty Thousand Naira) Bukky Law Books, Rivers State High Court Complex, Moscow Road, Port Harcourt – 📞 08034868754📞 08034729738📞 Enquiries: ______________________________________________________________________ Four New Titles From Prof. Ozekhome SAN Address Judiciary, Separation Of Powers, And Media --- Order Now 📞 Enquiries: +234 704 044 9375 | +234 814 813 4773 | +234 816 872 3532 📧 Email: educodexl@gmail.com Follow the voice of wisdom. Read Prof. Mike Ozekhome. Be inspired. Be enlightened. Be empowered. ___________________________________________________________________

Grab Your Complete Law Reports Now!!! IP, Company, Evidence & Land Cases - All Volumes With Digital Index!!!

To get a copy kindly Call 07044444777, 07044444999, 08181999888, https://alexandernigeria.com/ ______________________________________________________________________

[A MUST HAVE] Evidence Act Demystified With Recent And Contemporary Cases And Materials

Available now for NGN 40,000 at ASC Publications, 10, Boyle Street, Onikan, Lagos. Beside High Court, TBS. Email publications@ayindesanni.com or WhatsApp +2347056667384. Purchase Link: https://paystack.com/buy/evidence-act-complete-annotation ______________________________________________________________________