Tinubu overhauls tax collection system, strips MDAs of revenue powers

President Bola Tinubu on Thursday enacted four pivotal tax reform laws, signaling a major shift in Nigeria’s fiscal structure and centralising the authority to collect federal taxes under a single agency.

With the signing, key institutions—including the Nigeria Customs Service and the Nigerian Upstream Petroleum Regulatory Commission—stand to lose their tax collection responsibilities, as the newly established Nigeria Revenue Service (NRS) becomes the sole body for federal tax administration.

“We have opened the door for new economic and business opportunities. We are showing that Nigeria is truly ready and open for business. Easy in, easy out,” Tinubu said during the signing at the State House in Abuja.

He acknowledged the difficulty of reforming tax structures but praised the legislative and policy stakeholders for steering the process. “What you have provided is leadership and courage in the face of mounting dispute. Nowhere in the world will tax reforms be any easier,” he said.

The president described the move as a turning point: “We are in transit. We have changed the rule. We have changed some of the misgivings. The question of our tax-to-GDP and all other formulas will be obsolete.”

The legislation follows nearly two years of work by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by tax expert Taiwo Oyedele, who was appointed shortly after Tinubu suspended certain excise duties via Executive Orders in mid-2023.

The committee’s efforts, which included wide-ranging consultations and a consolidation of over 200 taxes into just 10, led to the drafting of the four laws: the Nigeria Tax Bill (Fair Taxation), Nigeria Tax Administration Bill, Nigeria Revenue Service (Establishment) Bill, and Joint Revenue Board (Establishment) Bill.

The proposed reforms encountered opposition from some state governors and legislators—particularly from the North—over concerns that a revised VAT-sharing formula could favour southern states. Despite this, harmonised versions of the bills were passed in May 2025, after extensive stakeholder engagement.

The president said the new laws would unify the tax system, eliminate duplication, restore investor confidence, and promote transparency. “They will unify our fragmented tax system, eliminate wasteful duplications, cut red tape, restore investor confidence, and entrench transparency and coordination at every level,” he said.

Executive Chairman of the new Nigeria Revenue Service, Zacch Adedeji, confirmed that the laws will take effect on January 1, 2026. “Based on best practices globally… the effective date will be January 1, 2026, by the special grace of Almighty God,” Adedeji stated.

He explained the timeline would allow for public sensitisation and alignment with Nigeria’s budget cycle. “When you have this kind of change, it’s not what you do mid-year… So effective dates, by God’s grace, will be first of January 2026,” he added.

Oyedele, who leads the reform committee, described the tax regime as “pro-poor” and focused on economic relief for low-income earners and small businesses. “More than 1/3 of workers in both the private and public sectors will now be exempted completely from PAYE… Small businesses… will no longer have to worry about paying corporate income tax or charging VAT,” he said.

Essential items such as food, healthcare, education, transportation, and housing will also be exempt from VAT, which Oyedele said would reduce the cost of living. “That’s a huge relief for them,” he added.

He also highlighted the reforms’ transparency goals: “The current system is opaque. And usually, if you’re hiding stuff from me, I need to be suspicious of you… So, these new laws require that government should be more transparent.”

The NRS, which replaces the Federal Inland Revenue Service (FIRS), will digitise tax administration using data such as NINs and bank details to prevent evasion.

According to Oyedele, the reforms are designed to be people-focused, efficient, and growth-driven. “We estimate that the tax gap… is in the region of 70 per cent. We want to close that gap,” he said, noting that curbing tax evasion and eliminating inefficient incentives would help boost revenue without imposing new taxes.

Chairman of the Senate Finance Committee, Senator Sani Musa, said the new tax regime reflects national consensus. “We brought out bills that seek the aspirations of Nigerians,” he said, citing provisions to protect low-income earners and boost industrial competitiveness.

Hon. James Faleke, Chairman of the House Finance Committee, hailed the process as a rare bipartisan success. “A once ‘mission impossible’ task made successful through national cooperation,” he said.

Business leaders also welcomed the move. NECA Director-General Adewale-Smatt Oyerinde described it as the end of a decade-long struggle against multiple taxation. “Our immediate reaction is ‘uhuru’,” he said, warning that implementation would be the real test.

Oyerinde added, “The main work is implementation… The challenges of multiplicity of taxes, levies and fees have been a major issue for the Organised Private Sector for over 10 years.”

NECA President Dr Ifeanyi Okoye urged the government to ensure the reforms are not limited to paper. “This must be a catalyst for the policy coherence and reform implementation that businesses, and indeed, the country urgently need,” he said.

Energy adviser to the president, Olu Verheijen, noted that the new legislation also codifies fiscal incentives for clean energy and oil sector investments. She said the clarity provided by the reforms has already attracted over $6 billion in fresh investment.

“With their codification, the administration has delivered long-term certainty and regulatory clarity, ensuring these critical incentives are protected from future policy reversals,” Verheijen stated.

(PUNCH)