The Federal Authorities will successfully quit about N1.4 trillion in income in 2026 by decreasing the company earnings tax (CIT) fee from 30% to 25%, as a part of its newly consolidated tax reform framework.
Chairman of the Presidential Fiscal Coverage and Tax Reforms Committee, Mr. Taiwo Oyedele, disclosed this on Friday throughout a media workshop on the brand new tax legal guidelines, explaining that the transfer is deliberate and aimed toward stimulating financial progress reasonably than introducing new taxes.
Based on Oyedele, information from the Federal Inland Income Service (FIRS) reveals that company earnings tax collections stood at about N8.6 trillion in 2024.
A 5 percentage-point discount from the present 30% fee, he mentioned, interprets to roughly N1.4 trillion that the federal government will forgo yearly.
“In case you do the maths, taking away 5% out of 30% interprets to round N1.4 trillion. So that is authorities giving N1.4 trillion to companies subsequent yr,” Oyedele mentioned.
Development over new taxes
Oyedele mentioned the tax reforms are anchored on the idea that sustainable authorities income can solely come from financial enlargement, not increased tax charges.
He argued {that a} rising financial system naturally widens the tax base by creating jobs and supporting companies, whereas extreme taxation solely deepens financial stagnation.
“The quickest and most sustainable solution to generate income is to permit the financial system to develop. If I’m unemployed, you’ll be able to have the perfect private earnings tax legislation on the earth, however you can’t accumulate tax from me,” he mentioned.
Based on him, the brand new tax legal guidelines deliberately keep away from introducing new levies, as a substitute specializing in eradicating bottlenecks and decreasing the price of doing enterprise in Nigeria.
VAT enter credit to unlock further advantages
Past the CIT discount, Oyedele mentioned companies will profit much more from modifications to the Worth Added Tax (VAT) regime, which is able to take impact from January 2026.
Beneath the brand new legislation, he mentioned firms throughout sectors, will be capable to declare enter VAT credit on belongings, overheads, and companies—classes that had been beforehand excluded.
“You’ve by no means been in a position to declare any enter credit for VAT as a result of the legislation says you can’t. From January subsequent yr, you grow to be eligible to say enter credit. Like you’re going to get cash in your bank accounts,” he mentioned.
- This will probably be along with current enter VAT credit on stock, that are being retained underneath the brand new legislation.
- Oyedele defined the affect of the VAT modifications utilizing bread for instance. Presently, bread is VAT-exempt, that means bakers don’t cost VAT on gross sales however can not get well VAT paid on inputs resembling sugar, butter, tools, automobiles, and utilities.
- Consequently, these hidden VAT prices are constructed into the value of bread, making it costlier for shoppers.
- Beneath the brand new framework, bread will grow to be VAT zero-rated reasonably than exempt. This permits bakers to cost VAT at 0% whereas receiving full refunds on VAT paid on manufacturing inputs.
“What meaning is the price of producing bread will come down,” Oyedele mentioned.
He famous that the identical zero-rating precept now applies to meals, schooling, and healthcare, sectors thought-about important to family welfare.
Oyedele acknowledged that the reforms will cut back authorities income within the quick time period however insisted the trade-off is intentional.
What you must know
Nigeria is implementing a complete tax overhaul, with the primary provisions of 4 new tax reform acts (collectively known as “the Acts”) changing into efficient on January 1, 2026.
- These reforms purpose to simplify the tax system, broaden the tax base, and introduce vital modifications for each people and companies.
- To drive the implementation of those new legal guidelines, President Bola Tinubu has just lately authorised the institution of the Nationwide Tax Coverage Implementation Committee (NTPIC).
- The newly constituted committee, based on the assertion, will probably be chaired by famend tax skilled Mr. Joseph Tegbe, a Fellow of each the Institute of Chartered Accountants of Nigeria (FCA) and the Chartered Institute of Taxation of Nigeria (FCIT).
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