To curb tax evasion, informal businesses should be formalised –Ohagwa, CITN President

By Henry Uche

President and Chairman of Council, Chartered Institute of Taxation of Nigeria (CITN), Mr. Innocent Ohagwa, has said Nigeria’s recent tax reforms mark a major shift towards a fairer and more efficient tax system, with stronger safeguards for taxpayers and greater emphasis on voluntary compliance. The seasoned tax expert maintained that the success of the new laws will depend on effective implementation, taxpayer education, digital adoption and efforts to expand the tax base without raising tax rates.

According to him, the best way to curb tax evasion is to formalise informal businesses currently outside the tax net.

In this interview, he speaks on Nigeria’s tax system and policy and the implications for the ordinary Nigerian.

Nigeria’s tax-to-GDP ratio remains low; what practical reforms can improve compliance without overburdening taxpayers?

Improving Nigeria’s tax-to-GDP ratio should not be about increasing the burden on compliant taxpayers. The priority should be to make compliance easier, broaden the tax base, and strengthen tax administration. Practical measures include simplifying registration and filing processes, expanding digital tax services, harmonising taxpayer data across government agencies, reducing multiple taxation, and improving taxpayer education and services. Equally important is building confidence in the tax system through fairness, transparency, and accountability. The most sustainable path is to bring more economically active persons into the tax net, leverage technology, and encourage voluntary compliance while supporting economic growth.

Do current tax reform efforts adequately address Nigeria’s structural revenue challenges, and what gaps remain?

The recent tax reforms represent one of the most significant attempts to address Nigeria’s structural revenue challenges. The new laws seek to modernise tax administration, strengthen intergovernmental coordination, improve taxpayer protection, and leverage technology to enhance compliance and revenue collection. Importantly, the reforms recognise that sustainable revenue mobilisation depends on taxpayer confidence. Measures such as the Tax Appeal Tribunal, the Office of the Tax Ombud, and other taxpayer-centred safeguards are expected to strengthen trust, fairness, and accountability. The priority now is effective implementation, particularly in the areas of taxpayer awareness, digital readiness, and record-keeping practices among SMEs and operators in the informal sector.

How can Nigeria effectively curb tax evasion, particularly within the informal sector?

The most sustainable approach is to promote formalisation. Many informal businesses remain outside the tax net due to limited record-keeping, low awareness of tax obligations, and the complexities of formal compliance. The solution lies in making formalisation easier and more rewarding through simplified presumptive tax regimes, taxpayer education, reduced compliance burdens, and greater utilisation of incentives available within the formal economy. Governments can also leverage market associations, trade groups, cooperatives, and professional bodies as trusted channels for taxpayer education and compliance. When formalisation becomes easier and more beneficial, voluntary compliance naturally improves.

What is the best way to resolve the issue of multiple taxation across federal, state, and local governments?

One of the key objectives of the recent tax reforms is to address the longstanding challenge of multiple taxation through greater harmonisation, coordination, and clarity in tax administration. The reforms seek to eliminate overlapping taxes, levies, and charges, reduce duplication of collection efforts, and create a more predictable and business-friendly tax environment. At the federal level, significant progress has been made through the harmonisation of tax laws and administration under the new tax framework. At the sub-national level, the Joint Revenue Board of Nigeria (Establishment) Act, 2025, has provided a framework for coordination and harmonisation among states and local government areas. Implementation is already gaining momentum across the country as states continue to align their laws and revenue administration processes with the harmonised framework. As this process progresses, taxpayers should experience greater clarity, reduced duplication, and a more efficient tax system. Ultimately, the most effective solution to multiple taxation is sustained collaboration among all tiers of government and consistent implementation of the harmonised tax framework established by the reforms.

Should Nigeria prioritise expanding the tax base over raising tax rates, and how can this be achieved quickly?

Absolutely. Expanding the tax base is a more sustainable and growth-friendly approach than increasing tax rates. Nigeria’s revenue potential lies in bringing more economically active individuals and businesses into the formal tax system rather than imposing higher taxes on compliant taxpayers. The recent tax reforms demonstrate this approach through targeted reliefs, exemptions, and incentives for low-income earners, small businesses, startups, and priority sectors. These measures reduce compliance costs, encourage formalisation, and stimulate economic activity. Expanding the tax base can be accelerated through better taxpayer identification, greater integration of government data, effective use of technology, and sustained support for businesses transitioning into the formal economy.

How can tax policy be better aligned with economic growth, especially for SMEs facing rising costs?

Tax policy must strike a careful balance between revenue generation and economic growth. For SMEs, the priority should be to reduce the cost of doing business, encourage investment, and support business sustainability, particularly in the face of rising energy, financing, and operating costs. The recent tax reforms have introduced targeted reliefs and incentives for small businesses and productive sectors of the economy. These measures are designed to allow businesses to retain more resources for growth, expansion, and job creation. Going forward, tax policy should reward productivity, investment, innovation, and job creation while reducing non-tax burdens and improving policy certainty. When businesses grow, government revenues grow sustainably.

What role should technology play in improving tax administration, transparency, and revenue collection?

Technology is indispensable to modern tax administration. It improves efficiency, enhances transparency, reduces leakages, and makes compliance easier through digital registration, filing, payment, and taxpayer service platforms. While several tax authorities have made significant progress in digitalisation, the level of adoption remains uneven across the country. At the same time, many businesses still rely on manual record-keeping systems and may require support to adapt to emerging digital compliance requirements. The success of initiatives such as e-invoicing will depend on effective implementation, taxpayer education, technical support, and ensuring that both revenue authorities and taxpayers are adequately prepared for the digital transition.

Should states be granted greater fiscal autonomy in tax collection, and what are the risks and benefits?

Nigeria’s Constitution already recognises fiscal federalism by allocating taxing powers among the different tiers of government. The issue is not necessarily more autonomy, but how those powers are exercised within a coordinated framework that promotes efficiency, accountability, and economic growth. Greater fiscal autonomy can strengthen internally generated revenue, improve accountability, and encourage innovation in revenue administration. However, without effective coordination, it could also result in overlapping taxes, regulatory inconsistencies, and higher compliance costs. This is why the recent tax reforms and the enhanced role of the Joint Revenue Board are important. The objective is to preserve constitutional powers while promoting a harmonised and taxpayer-friendly tax system.

Are current tax incentives for investors delivering real value, or do they undermine revenue generation?

Tax incentives should be assessed not only by the revenue forgone but by the economic value they create. Well-designed incentives can attract investment, create jobs, encourage technology transfer, and support priority sectors of the economy. The recent tax reforms have introduced a more focused and transparent incentive framework by rationalising some legacy incentives and placing greater emphasis on accountability, monitoring, and measurable economic outcomes. The real test of any incentive regime is whether it delivers investment, employment, productivity, and long-term economic growth.

How is CITN preparing professionals for emerging issues like digital taxation and global minimum tax rules, and what should Nigeria expect in the next three to five years?

The tax profession is evolving rapidly due to digitalisation, e-invoicing, artificial intelligence, and international tax developments such as the OECD/G20 Two-Pillar Solution and the Global Minimum Tax framework. CITN continues to prepare professionals through training programmes, webinars, conferences, professional examinations, technical publications, and stakeholder engagement. The recent tax reforms have also reinforced the role of tax professionals by formally recognising accredited tax agents and promoting greater professionalism within the tax system. Over the next three to five years, Nigeria is likely to witness deeper digitalisation of tax administration, greater alignment with international standards, and increased demand for professionals with digital, analytical, and international tax competencies.