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By Olakunle Olafioye
The month of January is here with the Federal Government’s new tax policy. Many Nigerians have spent the last few weeks in apprehension of the new tax regime as fear of losing more money in the form of taxes and uncertainty over how the policy will unfold and impact people’s finances has continued to unfold.
Despite assurances by the government that the new policy is not meant to take more money from Nigerians, this explanation offers no comfort to many whose understanding of the new tax dispensation is limited. Questions as to who pays what? Which financial transactions are taxable? How will the government ascertain the truth about incomes into individuals’ bank accounts? These and several other questions continue to agitate the minds of most people.
One of the dominant concerns has been the implications of the new tax regime on businesses particularly those still smarting from aftershocks of the recent economic reforms. A business owner, Mrs Bolanle Lawal, pointed out that imposing a new tax on businesses at a time when the survival of many businesses are currently being threatened by high operating costs, exchange rate instability, and poor consumer demand, could have devastating effects on the businesses. “I am really afraid because many businesses that are already gasping for breath might be forced to close down with the attendant effects of massive job losses.
The Chief Executive Officer of Centre for Promotion of Private Enterprise, CPPE, Dr. Muda Yusuf also expressed similar view and called on the government to focus on large corporations, established SMEs, and high-net-worth individuals that would deliver substantial revenue gains without destabilising livelihoods or deepening social resistance.
“The ultimate success or failure of Nigeria’s tax reform will depend far less on its legislative provisions and far more on how it is implemented.
“Without careful sequencing, political sensitivity, and economic realism, even well-intentioned reforms can trigger resistance, disrupt livelihoods, and further erode public trust. This is the central concern of the CPPE,” a statement by the CPPE boss read.
Nigerians’ concerns over the new tax are legion. The timing of the new tax is another source of worry for most people. Nigeria is currently grappling with high inflation, currency depreciation, and increased fuel and food prices. For many households, disposable income has shrunk drastically. All these have made many to consider the idea of the new tax regime, with the possibility of raising costs, an additional burden to Nigerians. Dr Yusuf observed that like businesses, many households are experiencing reform fatigue. He therefore called for caution against rigid enforcement of the policy. He said: “In this context, expecting full and simultaneous compliance across all sectors of the economy is unrealistic.
“A rigid, enforcement-heavy approach risks undermining reform credibility before its benefits have time to materialize.
“Tax reform is not a one-off exercise; it is a dynamic process that must evolve with implementation feedback, economic conditions, and social realities,” he stated.
Perhaps the most prevalent concern about the tax policy has been lack of trust over government’s sincerity to use the revenues from the tax to better the lives of the citizens. A public analyst, Mr. Oludele Moses, is of the view that the past failures of the government to justifiably account for taxes paid by Nigerians will pose a major challenge for the government in implementing the new tax. “Over the years, the people have paid taxes without seeing corresponding improvements in the country. The state of the infrastructure across the country remains abysmal. Our healthcare system is still nothing to write home about. Go to our public schools and see the condition under which our children are learning. The problem is not paying the tax because the policy has been designed to be driven by technology. The fear is that will the new system translate to better and improved welfare for the citizens?” Oludele asked.
But an economist, Dr. Anthony Ikhile, is optimistic that the improved revenue allocations to states and local government councils will serve as a major incentive for the two tiers of the government to up the performances at these levels. The new VAT revenue sharing formula allocates 10 per cent to the Federal Government, states will take 55 per cent while the local governments get 35 per cent. This, he noted, “is a boost for states and local governments, because they will now have more resources to fund schools, hospitals, and local infrastructure. So there should be little or no more excuses for nonperformance at state and local levels. The onus now lies with the people who should take the initiative to hold the state and government authorities accountable,” he said.
Professionals in several fields including aviation and healthcare have equally expressed fear about the possibility of the new tax leading to increase in cost of accessing their services with the attendant fear that the new tax policy might price their services beyond the reach of Nigerians. The Nigerian Medical Association and the Guild of Medical Doctors have raised the alarm that the new tax could further impoverish the citizens and further inhibit access to healthcare services.
But the government has identified the nation’s health sector as one of the primary beneficiaries of the tax reforms. With 55 per cent of VAT revenue flowing to states and 35 per cent to local governments, the government maintains that funding for healthcare infrastructure, public clinics, and universal coverage initiatives should increase.
Apart from this, the reforms, the government pointed out, expands the list of zero-rated items to include essential goods and services. The comprehensive VAT-free coverage covers medical services and equipment such as: diagnostic services such as X-rays, MRI, and laboratory tests, surgical procedures, medical consultations, and hospital treatment, ambulance services and emergency medical transport, Medical insurance services, and physiotherapy, occupational therapy, and other rehabilitation services
Additionally, hospitals will maintain tax advantages while deducting input VAT credits from equipment purchases, facility improvements, and operational services. This, it is said, will improve cash flow and enable competitive pricing while ensuring affordable access to essential medical services.
A similar fear is also being entertained in the aviation sector where stakeholders are apprehensive that the new tax policy could further worsen and raise the cost of flight tickets. But the Presidential Fiscal Policy and Tax Reforms Committee insists that reform is part of the solution, not the source of the problem. Speaking specifically on how the aviation industry will benefit from the new tax, the committee said, “Overall, the new tax laws provide a strong legal and policy framework to resolve the long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.”
Another major concern that continues to resonate in the debates over the new tax policy is the fate of the already impoverished masses. In a statement released last week, the President of All Youths Reoriented Initiative of Nigeria (AYRIN), Ambassador Olufemi Ajadi Oguntoyinbo, expressed concerns that the new tax could exacerbate the living conditions of Nigerians. He cautioned that continued taxation without visible economic relief could further impoverish citizens. “You cannot keep obtaining from Nigerians without first making the country conducive for economic activities to thrive,” he said.
Continuing, the AYRIN President said, “Banks have been deducting money from Nigerians’ personal savings,” and asked: “What else do you want from the people by imposing a new tax law that also affects individual savings?”
“We already have an established personal income tax structure. Nigerians deserve to know how this new tax will benefit them. Don’t tell us only how to collect taxes—tell us how Nigerians will benefit,” he stated and added that “tax policies that do not consider the realities of the people will only deepen hardship.”
But the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, described the newly signed tax laws as “pro-poor,” saying the policy will ease the burden on low-income earners, small business owners, and everyday Nigerians contrary to the narrative that the new policy will impoverish them.
He explained that one-thirds of workers in both the private and public sectors would be exempted completely from PAYE. “They will not have to pay personal income tax. Small businesses, over 90 per cent of small and micro, nano businesses, will no longer have to worry about paying corporate income tax or charging VAT or even deducting withholding tax or paying PAYE for their employees.”
Oyedele added that the reforms will leave more money in the hands of the ordinary Nigerian to take care of their daily needs. He announced a new zero‑rate VAT framework on essential items.“Any traces of VAT in food, in education, in medical and health care are now removed completely, so we should see prices of those items come down,” Oyedele explained.
