The recent backlash against the 2026 tax reform reminds me of my undergraduate thesis topic which was “contemporary challenges of taxation laws in Nigeria”, presented in 2018. I chose that topic because of my interest in harmonizing law and economic policies, a path I am still threading till this moment. In my post-university life, I have addressed a lot of legal and economic policy topics, chiefly, contemporary tax policies in Nigeria vis-a-vis development economics. Hence, I see the need for tax reforms and tax contributions to national prosperity but I also believe in modest tax regime (not excessive tax system) and tax “incentivization”, a mantra I preached as a television programme guest in 2022. The following are my observations and reservations regarding the forthcoming 2026 tax regime having published an article on the same subject in first quarter of 2025: Regardless of some weaknesses, the tax reform is not evil because it aspires to modernize tax collection strategies, check revenue leakages, centralize collection and widen tax net. Reforming a tax system that will enable revenue contribution to GDP by 20%/30% cannot be viewed as backward. Impliedly, Nigeria needs minimum of N20trillion tax revenues annually to support other sources of revenues.
Furthermore, the tax reform will naturally attract backlash not just because of peoples’ hatred for tax payments but largely because of high public governance distrust in Nigeria. You can’t expect citizens of a country whose major federal roads are hellish to be excited about tax enforcements. Most basic infrastructure are not in good shape despite huge borrowings and existing revenue collection.
The 2026 tax regime, though ambitious, failed to consider the GDP per Capita of Nigerians (reality of average income) and didn’t see need to reduce the personal income tax to less than 20% in order avoid taxing low purchasing power (25% PIT on N200,000 earning as an example). The tax exemption for poor earnings is very fair.
Albeit, the reform failed an ambiguity test on personal income tax for non-salary earnings. How do they conveniently assess non-salary earner whose monthly or weekly income fluctuates? How do you determine/differentiate his or her earning flow from transaction deposits especially when all transactions will be digitally trailed? Failing to address this obscurity will be counterproductive to national cashless policy drive as less-formal sector players(SMEs) will prioritize cash transactions to escape unfavourable taxations. I will rather suggest 3/6% personal income levy on annual turnovers of non-salary earnings.
The tax reform also failed to complete its harmonization drive because it has not streamlined “endless” aviation taxes/levies into three or four levies. It also left residual list taxes (local government taxes/levies) unattended to as it houses more than seven kinds of taxes and levies, a misfortune of multilayered taxes for small entrepreneurs especially in top Nigerian cities such as Lagos and Abuja.
Lastly, the new tax reform presents itself as a “ruthless taker” as it lacks definite tax incentives and compliance rewards. Voluntary compliance is the best model of tax administration but we can’t achieve voluntary compliance when we have high political distrust and poor incentives. Direct incentives such as low-interest loans, interest-free loans, business grants, easy consumer credits, dependant scholarships, food vouchers, import waivers, credit cards, etc., all these ought to be part of the tax compliance reward scheme to encourage voluntary compliance and portray win-win approach.
Mujib Dada-Kadri Esq., Abuja
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