Nigeria’s latest round of tax reforms—introduced through legislative amendments and fiscal policy announcements—has been branded by the government as transformational. With a vision to broaden the tax base, boost revenue, and reduce dependence on oil, the reforms promise a more equitable system. But the big question remains: Will they actually benefit millions of hardworking Nigerians—those earning through honest labour, entrepreneurship, and micro-enterprise?
The Uneven Tax Burden
Nigeria’s tax system leans heavily on indirect taxes—like VAT and levies—that disproportionately affect low-income earners. Formal sector workers already contribute through PAYE, while wealthier individuals and corporations often benefit from exemptions, loopholes, or preferential treatment. A 2023 report by the Federal Inland Revenue Service (FIRS) revealed that a staggering 70% of potential tax revenue remains uncollected.
In response, the Presidential Fiscal Policy and Tax Reforms Committee, led by Taiwo Oyedele, has proposed sweeping reforms focused on fairness, compliance, and administrative efficiency. These include:
- Raising the VAT threshold to exempt small businesses
- Consolidating over 60 taxes into fewer than 10
- Reforming tax waivers and incentives, especially those that don’t support job creation
- Rolling out a unified tax payment platform
- Increasing digital tax collection and shifting away from oil dependency
These proposals are promising—especially for those on the margins—but their success hinges on execution, equity, and whether revenues will tangibly improve public services.
For the Working Class, Skepticism Is Justified
From market women and artisans to gig workers and junior civil servants, Nigeria’s working class pays taxes in myriad ways—often without formal recognition. Indirect taxes on essential goods, tolls, levies, and informal payments at local markets or checkpoints hit them hardest. Yet, many of these citizens receive little in return: failing schools, erratic power, poor healthcare, and crumbling infrastructure.
While government officials claim these reforms will lighten their load, the goal of raising Nigeria’s tax-to-GDP ratio from 10.8% to 18% suggests otherwise. Without progressive taxation or reinvestment in social services, working-class Nigerians fear more take and little give.
Promises vs. Practical Realities
Proposed reforms like raising the VAT threshold and simplifying the tax system are necessary steps. Yet gaps persist. There is little in the reform documents about:
- Progressive income or wealth taxes that target high earners
- Transparency in tax spending to restore public trust
- Dedicated reinvestment in education, health, and infrastructure
The last major reform, the 2019 VAT hike from 5% to 7.5%, raised revenues but failed to significantly improve citizens’ lives—leaving many disillusioned.
Additionally, aggressive and uncoordinated revenue collection at the state and local levels remains a serious issue. Market vendors, truck drivers, and barbers are routinely subjected to overlapping fees and unofficial levies—often with no receipt or accountability. A truly effective reform must include subnational harmonisation, capacity building, and oversight.
Inclusion: Not Just a Buzzword
Nigeria’s informal economy is heavily populated by women, who are overrepresented in low-margin, VAT-burdened businesses. Yet, they are rarely consulted in tax policy discussions. Persons with disabilities also face systemic barriers—from discrimination to poor infrastructure access.
Although the committee has pledged a gender- and disability-inclusive approach, this must go beyond lip service. Inclusion must be enshrined in legislation, institutional processes, and implementation frameworks.
Technology and Trust: A Double-Edged Sword?
Digitisation is a key pillar of the reforms. Platforms like FIRS’s TaxPro Max promise transparency, efficiency, and fewer intermediaries. However, millions of Nigerians still lack internet access or digital literacy. Without bridging this digital divide, automation may simply exclude the very people it intends to help.
There’s also the risk of digital surveillance. Citizens need guarantees that their data will be protected and used solely for legitimate tax and service delivery purposes—not political or commercial exploitation.
The Political Elephant in the Room
Ultimately, Nigeria’s biggest tax problem is not just technical—it’s political. The entrenched interests of elites who benefit from opaque tax exemptions, asset secrecy, and weak enforcement are a major barrier. Reforms must address:
- Ending sweetheart deals
- Prosecuting tax evasion
- Publishing public officials’ tax records
- Linking tax revenue directly to service delivery
Reform without political will is rhetoric. True change requires transparency, accountability, and civic pressure.
What a Working-Class-Centred Tax Reform Should Look Like
A truly inclusive tax policy would:
- Exempt basic goods and services like food staples, medicine, sanitary products, and school supplies from VAT
- Implement progressive taxes on wealth, luxury assets, and capital gains
- Ensure transparent tax spending, with citizen dashboards and audits
- Tie taxes to tangible benefits—healthcare access, school funding, transport subsidies
- Involve affected communities—especially women, informal workers, and persons with disabilities—in policy design and evaluation
Taxation as a Social Contract
Tax is more than a revenue tool—it is a moral contract between citizens and the state. Nigeria’s tax reform moment is an opportunity to rebuild that contract, with justice and equity at its core.
Until the average artisan sees better roads, the teacher earns a livable wage, the market woman sends her daughter to school, and families access affordable healthcare, we must keep asking:
Whose reform is it anyway?
For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
