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“Change is never painful, only resistance to change is painful.”
—Buddha
By Omoniyi Salaudeen
The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, stands at a historic crossroads with the planned implementation of the new tax reform bills taking effect in January, 2026. Right from its formation stage, the reform policy has triggered as much praise for its audacity as it has backlash for its perceived regional and economic biases. The controversy surrounding the Tax Reform Bills 2024/2025 isn’t just about the numbers; it’s about the fundamental social contract between the Nigerian state and its citizens.
The most explosive part of the raging debate is the proposed change in the Value Added Tax (VAT) distribution formula to favour the state of derivation rather than the state of collection. Northern governors and leaders led by figures like Governor of Borno State, Babagana Zulum, have fiercely opposed this proposal, fearing it will siphon revenue toward industrial hubs like Lagos and Rivers, further impoverishing the North.
Over time, Oyedele has countered this notion with professional composure, arguing that the current system is lazy and that the new formula proposing 50 per cent even distribution, 30 per cent derivation and 20 per cent population rewards productivity and creates a fairer competitive landscape. He further maintains that the reform is meant to shift the burden away from investment and toward profit.
It doesn’t end there. Now, the implementation of these reforms has become another battleground for some reasons. The allegation that the gazetted tax laws, the final versions signed by the President, differ from the bills passed by the National Assembly has introduced a major constitutional crisis just weeks before the January 1, 2026, implementation date. The House of Representatives has already constituted a seven-member Ad-Hoc committee to conduct a forensic comparison.
Hon. Abdulsammad Dasuki, who raised the alarm, alleges that substantive provisions—such as oversight mechanisms and specific tax rates—were either inserted or removed after the floor vote. If the committee finds that the gazetted laws are indeed cloned or altered, the National Assembly will likely declare the gazetted versions unconstitutional. This would mean the laws President Tinubu signed are technically void because the President cannot sign a law that wasn’t properly passed by the legislature. With the January 1 start date looming, the most immediate fallout will likely be legal. In the circumstance, organised groups like the Organized Private Sector or Northern Governors may likely file for an injunction to stop the implementation of the reforms.
At this critical juncture, the Presidency and Oyedele face a difficult choice. On one hand, the Executive may admit to administrative errors during the gazetting process at the Ministry of Information and send an Amendment Bill to the National Assembly to align the laws. On the hand, if the Tax Committee insists on implementing the gazetted version, it risks a total breakdown of trust with the North, which is already suspicious of the VAT derivation formula and the business community. The latter option has a far-reaching implication for business investment. If the tax code is under investigation, companies will hesitate to make long-term financial plans for 2026. This alteration scandal threatens to overshadow the actual benefits of the reforms. If Oyedele can navigate the politics of this alteration without losing the core of his revenue-boosting reforms, he cements his legacy. If not, Nigeria risks a fiscal vacuum heading into 2026.
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The 2025 Tax Reform represents a massive overhaul of Nigeria’s fiscal architecture. It effectively collapses dozens of old laws into a single framework designed to shift the tax burden from struggle to success. The reforms aim to simplify tax compliance, reduce burden on low-income earners and small businesses, and increase revenue generation. Simplifying tax structure means consolidating dozens of taxes into a streamlined system.
For effective implementation, the FIRS is being rebranded as the Nigeria Revenue Service (NRS) to reflect its broader role. Companies will now deal with a single tax office for all their federal tax types rather than multiple units. A Tax Clearance Certificate (TCC) is now a mandatory precondition for all public procurement and licensing.
The policy initiative had been met with enthusiasm, but also some concerns and misconceptions. Under the tax regime, individuals earning ₦800,000 or less per year are now 100 per cent exempt from Personal Income Tax. For higher earners, the tax rates have been restructured to be more progressive, ranging from 0 per cent to 25 per cent. Additionally, employees can now deduct 20 per cent of their annual rent capped at ₦500,000 from their taxable income, a major win for urban dwellers.
As an incentive for investment promotion, small businesses with an annual turnover of N50 million or less are equally exempt from various taxes, including Value-Added Tax (VAT), withholding tax, and company income tax. According to the new rules, companies with turnover below N100 million will pay zero company income tax (CIT), while eligible start-ups are tax-exempt. Essential goods and services like food, education, healthcare, and transportation are as well zero-rated or exempt from VAT.
However, the Capital Gains Tax (CGT) for large companies was hiked from 10 per cent to 30 per cent. This has sparked a capital flight debate, with critics arguing it punishes the very companies Nigeria needs for industrialization.
As part of sensitisation campaign ahead of the new fiscal year, Oyedele has confirmed the Federal Government’s commitment to exempting about one-third of the workforce across both the public and private sectors from paying personal income tax. He explained that the measure was to ensure a fairer and more inclusive tax system. According to him, the exemption would affect roughly one in every three workers nationwide, marking a decisive break from what he described as a long-standing practice of “taxing poverty.” “To improve the business environment, the government has reduced the corporate income tax rate from 30 per cent to 25 per cent. In addition, small businesses with annual turnover below ₦100 million will now enjoy a zero per cent corporate tax rate. These measures are intended to encourage informal enterprises to formalise, expand operations and gain access to credit,” he stated.
Oyedele also highlighted the problem of multiple taxations and the proliferation of tax-collecting agencies, including non-state actors, which have made compliance costly, confusing and prone to abuse. The reforms, he said, would repeal several major existing tax laws and replace them with a streamlined framework aimed at eliminating duplication and improving transparency. “These reforms are about fairness, inclusion and growth. If we get the incentives right, businesses will grow, jobs will be created, and Nigeria will work better for everyone,” Oyedele posited.
Despite the immense benefits, critics fear that the implementation of the new tax reforms will drag more people into poverty. This brings to question the essence of social capital, if the end result of the reforms leads to more hardship for the already overburdened citizens. Beyond rhetoric, the government must be seen to be open and transparent in the way the reforms are implemented and how the accrued revenue will improve the overall wellbeing of the people of this country. The intention may be good, in this endeavour, Oyedele faces an arduous task of overcoming the current trust deficit.
