…Comercio Partners provides insights into the key adjustments to Nigeria’s new tax reform bill passed by the Nigeria’s House of Representatives
MON MARCH 17 2025-theGBJournal| Nigeria’s House of Representatives has passed four tax reform bills proposed by President Bola Tinubu, marking a significant step toward overhauling the country’s tax system.
However, lawmakers made key adjustments to the original proposals before approval. One major change was the decision to retain the Value-Added Tax (VAT) rate at 7.5%, rejecting the proposal to increase it to 12.5% by 2026.
Lawmakers cited concerns about the economic impact of a higher VAT on businesses and consumers. Revenue allocation was also revised.
The initial plan to allocate 60% of VAT revenue to high-revenue states faced opposition due to regional equity concerns.
Instead, lawmakers capped this at 30%, while the remaining 70% will be distributed equally among all states (50%) and based on population (20%).
To ease the tax burden on low-income earners, the reforms exempt minimum wage earners from income tax. Additionally, the minimum tax threshold for domestic businesses has been raised to N50 billion ($32.66 million), ensuring that only larger companies bear the tax burden.
In the oil sector, the existing 85% petroleum profit tax has been replaced with a 30% corporate tax rate on gains from oil operations, aligning it with standard corporate taxation.
Meanwhile, a global minimum tax has been introduced for multinational companies with annual turnovers of at least $970.8 million to curb tax avoidance. The bills are now awaiting Senate approval and President Tinubu’s assent.
These reforms are part of broader efforts to boost Nigeria’s tax-to-GDP ratio, which remains low at 10.8%, and reduce dependence on borrowing to fund government spending.
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