Nigeria’s Tax Controversy

Reuben Abati

REUBEN ABATI

As the year ends, the biggest domestic controversy in Nigeria is the realization that when the new year begins, effective January 1, Nigerians will be faced with a new tax regime which will broaden the tax net, ensure better collection, equity and accountability and a more efficient sys-tem which means more revenue for the government. On January 1, the Federal Inland Revenue Service would also assume a new nomenclature, Nigeria Revenue Service (NRS). There are questions of trust and confidence, interpretation and understanding, over the tax laws that would give effect to this new dispensation. In July and early August 2023, the Tinubu admin-istration, barely two months after assuming office set up a Presidential Committee on Fiscal Policy and Tax Reforms to simplify the country’s tax system, review the enabling laws and structures, and create a system for earning more revenue. The committee was headed by Mr. Taiwo Oyedele, an expert in the subject area who had spent the better part of his career at PwC, a leading accounting firm, where he rose to become a Fiscal Policy Partner and Africa Tax Leader.  There were about 100 other members in the committee representing different sectors in society. The outcome of the tax-focussed deliberations was a set of four laws: The Nigeria Revenue Service (Establishment) Act 2025, which repeals the Federal Inland Revenue Service Act  and creates the Nigeria Revenue Service with an expanded mandate,  the Nigeria Tax Administration Act, 2025-  which establishes a uniform legal and operational framework for tax administration; the Joint Revenue Board (Establishment) Act, 2025 – which creates a governance structure and oversight mechanisms, and the Nigeria Tax Act, 2025- which har-monizes the country’s multiple tax laws.

The highlights of the Reform are as follows: to have a simpler, fairer, and more transparent tax system that would achieve the objectives of (1) putting people first’; (2) unlocking business growth; (3) energizing capital and access to finance; (4) correcting economic distortions; (5) ad-vancing progressivity; (6) encouraging formalization; (7) ensuring equity; (8) combating evasion and avoidance; (9) improved tax administration and governance; (10) harmonizing the tax sys-tem. In the official gazette published by the government we are told that “the reforms create a tax system that Nigerians can trust, one that works for the benefit of all.” These two issues of trust and benefit have been the main problems with the reform process and its outcomes from the very beginning.

The first major hurdle was the objection to the proposed tax reforms by Northern elites and state Governors over changes to the Value Added Tax (VAT) system. The main objec-tion   was about the proposed amendment to the VAT Act, which would allocate revenue based on the “derivation principle” that is – VAT funds would be distributed to states based on where goods and services are consumed and where the headquarters of the businesses generat-ing the tax are located. Northerners kicked that this will place them at a disadvantage because many businesses have their headquarters in the South, and particularly Lagos. Northern Gov-ernors protested that  the proposed amendment would reduce their share of VAT revenue and that in any case, they were not consulted by the Tax Reform Committee to accommodate their inputs. The Chairman of the Fiscal Policy and Tax Reforms Committee, Oyedele said the Northern Governors were in fact consulted! The controversy was loud, and it soon became po-liticized. The country was divided. Ethnic sentiments enveloped the division over tax. The tax reform committee eventually found itself negotiating with the Northern Governors, all over again, and at the end of the day, rather than a 60% derivation-based sharing of VAT, a com-promise formula of 50% equality, 30% derivation and 20% population was agreed upon. The bills were passed. The President gave his assent on 26 June 2025. Two of the New Tax Acts took effect immediately, the other two would take effect on January 1, 2026. In November 2025, President Tinubu approved the establishment of a National Tax Policy Implementation Committee (NTPIC) chaired by Mr. Joseph Tegbe, a Fellow of the Chartered Institute of Ac-countants and the Chartered Institute of Taxation. But the matter was not yet settled.

On Wednesday, 17 December, 2025, a member of the House of Representatives, Rep. Abdus-samad Dasuki (PDP, Sokoto), an opposition member, rose to his feet to raise a matter of privi-lege, during plenary to submit that his rights as. a lawmaker had been breached, he having ob-served discrepancies in the harmonized versions of the tax laws passed by the National Assem-bly and the versions gazetted by the Executive and made available to the public. He said he had spent three days to review the gazetted copies and the harmonized version adopted by both Chambers and he had observed discrepancies. Thus Rep. Dasuki re-opened the controversy around the tax laws. His allegation indicated a breach of the Constitution, due process and the doctrine of the separation of powers. The making of laws “for the peace, order and good gov-ernment of the Federation or any part thereof” is a legislative function guaranteed under Sec-tion 4 of the 1999 Constitution.   Whenever the Executive objects to any bill passed by the Na-tional Assembly, the appropriate thing to do is to withhold assent, and return the bill to the As-sembly with reasons for refusal – Section 58 (4) of the 1999 Constitution, as did President Mu-hammadu Buhari five times in the matter of the 2018 Electoral Act Amendment Bill.  The Na-tional Assembly may amend the bill further in response to the stated reasons for refusal, or override the Executive with a two-thirds majority as stated in Section 58(5). But to unilaterally rewrite a bill of the National Assembly and gazette a different version would be the very height of impunity and executive overreach.  The House of Representatives has set up a committee to look into the allegations.

The controversy this time around has been noisy and cantankerous. The firestorm that was lit by Rep..Dasuki has since been further fuelled by other lawmakers, namely Hon. Mansur Manu Soro, Senator Ali Ndume and a group of concerned lawmakers who also claimed that they have reviewed the document, and that indeed there were insertions, deletions and modifications by the Executive before the Gazette was published. Opposition party leaders and groups in-cluding Waziri Atiku Abubakar, Mr. Peter Obi, and Mallam Bolaji Abdullahi, the African Democratic Congress (ADC), the minority caucus of the House of Representatives, the Char-tered Institute of Taxation, the Nigerian Bar Association, as well as Omoyele Sowore have accused the Tinubu administration of either criminality, extortion or alterations that should be investigated. They want the tax laws suspended. The contentious sections are basically in the Tax Administration Act, and the specific areas of focus have been identified as Sections 27(3), 29(3), 41 (8), 60 (1). The complaint is that several oversight, accountability and reporting mechanisms approved by the National Assembly have been removed. Taiwo Oyedele in re-sponse has said that government worked not with the version of the House of Representatives, but the harmonized copy submitted by the National Assembly. He has also argued that there is a lot of misinformation in circulation engineered by persons who have not even read the Offi-cial Gazette published by the Federal Ministry of Information. He has used his Instagram page to debunk some of the misinformation to allay the fears that have been circulated among Nige-rians including the fear that Diaspora Nigerians will be taxed on their foreign income and re-mittances, he says this is not true, and that the fear that workers will pay more tax is absolutely untrue; if anything, most workers will pay less tax from January 2026. Besides, it is not true that anyone without a Tax ID will have their accounts frozen and their accounts automatically debited. The truth, he says, is that Tax ID is only required for business accounts and data harmonization, not automatic debit or freezing of accounts.

Oyedele added that the commencement date of 1 January is sacrosanct. He declared that “Bot-tom 98 per cent of workers will see either no Pay As You Earn (PAYE) tax or lower taxes to be paid, small businesses, 97 per cent of them, will be exempted from Corporate Income Taxes, Value Added Tax, and Withholding Tax and large businesses will see a drop in the taxes that they pay. The whole idea is to try and promote economic growth as well as shared prosperity for our people.”  The additional fear that the new tax regime will affect the aviation sector ad-versely has also been dismissed as untrue. The mystery in all of this is that the protest over the National Tax Reform Acts (NTA) is coming mainly from the House of Representatives. With the exception of Senator Ali Ndume, other members of the Senate and the Chamber itself has been studiously silent. The quietude of the Senate points to something else that should be in-cluded in the investigation of what went wrong with the Tax Acts as alleged. The National Assembly is the original custodian of harmonized laws that have been passed by the Federal Legislature. The onus is on the National Assembly to publish the harmonized version on its website without any further delay to allow the general public to compare and contrast and ar-rive at fact-based conclusions instead of the speculative, emotional and partisan speculations around the subject. Most of the commentators have not seen anything to compare. Simple question: where are the official harmonized bills certified by the Clerk of the National Assem-bly? Otherwise, the current controversy remains vague. The outstanding two laws take effect on Thursday, 1 January, two days from now. Each of the laws by the way is signed by Ka-moru Ogunlana Esq., Clerk to the National Assembly. Is he dead or alive?

However, there is no point throwing the baby away with the bathwater. The true test of any law is in its implementation. The law is made for man, not the other way round. The law is a living subject. It can be amended, tested in the law courts, it can even die if it does not meet society’s prevalent standards and expectations. The Nigerian Tax Administration Act, 2025 in which about five sections have been cited as controversial, is a detailed law with 148 sections and Five schedules. Five out of 148 sections would not seem enough to derail a reform process. Besides, there is no major controversy over the other three Acts on Taxation. Those who are calling for a wholesale suspension of the laws are simply being mischievous. Two of the four tax acts actually took effect from 26 June 2025.  The Executive has no powers to suspend the tax laws. Areas of contention can be identified through further investigation and addressed by the legislature accordingly.

Nobody likes the tax man, and so it has been in Nigerian history. During the colonial era, the tax man was the most unpopular member of the Nigerian community. Our great grandparents used to run into the bush on learning of the approach of the tax man. This would later lead to conflicts as in Lagos in 1916 when the colonial government introduced Water Rates to gener-ate revenue to fund infrastructure, specifically the Iju Water Works built in 1915.  The people and the Oba protested.  The provision of potable water became a political issue in Lagos.  In 1929, we had the Aba Women’s Riots in the Eastern Province of Nigeria, the women protest-ed against the taxation of women among other things. There were the Iseyin/Okeho tax riots of 1917, the Adubi War of 1918, the Ogbomoso Tax riots in 1925 and 1955, anti-tax riots in Warri Province (1927/28), and tax riots in Aba and Onitsha in 1956. In 1946, still in colonial Nigeria, Mrs Funmilayo Ransome-Kuti, “the Lioness of Lisabi,” led Egba women in protest against what she and her followers considered the unfair taxation of women by the colonial au-thorities. They chased the then Alake of Egbaland, Ladapo Ademola, Ademola 11 away from his throne for a whole year, 1949 – 1950.  They argued that there could be “no taxation with-out representation.” During the colonial era, the main issue was the burden of taxation, and additional hardship. In contemporary times, the average Nigerian is concerned about trust. Even if the people are willing to pay, they do not believe that additional revenue will translate into better government. They think the additional revenue collected would only be used to fund the conspicuous consumption of the ruling elite.

The irony though is that there is the less spoken consensus amidst the tax controversy that Ni-geria truly needs tax reform, and that taxes collected must be for the benefit of the people. This is where the long-term challenge lies.