What Nigeria’s tax reform means for you

Nigeria's Federal Executive Council recently approved a review of the country's tax policies, signaling a significant step towards bringing millions of businesses, especially small and medium enterprises (SMEs), in the informal sector into the formal tax net. The move comes as the deadline for the Voluntary Assets and Income Declaration Scheme draws closer, prompting discussions on the government's efforts to address the challenges of informal businesses operating outside the tax system. Ogochukwu Isiadinso, Associate Director for Tax Advisory and Regulatory Services at Andersen Tax, shed light on the progress made by the government in formalizing the informal sector and enhancing the national tax policy. One of the key challenges faced by the Nigerian government is the large number of businesses operating in the informal sector. Many of these businesses are unregistered, making it difficult for the government to track their activities and ensure tax compliance. Isiadinso highlighted the government's efforts to address this issue, including initiatives like the Voluntary Assets and Income Declaration Scheme (VAIDS) and the integration of systems to link business registration with tax identification numbers. Moreover, the government has been leveraging data from banks and the Corporate Affairs Commission to identify businesses that are evading taxes intentionally. By collecting data from multiple sources, the government aims to monitor business activities and identify non-compliant businesses. Isiadinso emphasized that these measures are essential for bringing businesses into the tax net, especially those that do not voluntarily comply with tax regulations. In terms of the national tax policy, Isiadinso highlighted significant progress in updating and modernizing the outdated tax laws. The government has been proactive in implementing recommendations from the National Tax Policy and Implementation Committee, particularly focusing on non-oil revenue generation. The introduction of executive orders such as the VAT order and customs tariff order demonstrates the government's commitment to fast-tracking tax reforms. The government has also proposed amendments to tax laws, which have been forwarded to the National Assembly for further deliberation. This expedited process reflects a rare instance of prompt action by the Nigerian government in reforming tax policies. Isiadinso emphasized the importance of swift implementation of changes to enhance tax compliance and revenue generation. Overall, Nigeria's tax reform initiatives signify a pivotal shift towards formalizing the informal sector, improving tax compliance, and optimizing revenue generation. By leveraging data integration, implementing updated tax laws, and streamlining policy changes, the government aims to create a more robust and inclusive tax system that encompasses businesses of all sizes. The ongoing efforts demonstrate a strong commitment to enhancing transparency, accountability, and economic development through effective tax reforms.