The Independent Media and Policy Initiative (IMPI) is convinced that the Nigeria Tax Act of 2025 stand out among the new tax laws as a piece of legislation that will widen the country’s tax net without necessary making life difficult for average Nigerians.
This according to the policy think tank is because of provisions of the new laws that will ensure that low income earners have a higher disposable incomes when the tax reforms take effect.
In a policy statement signed by its Chairman Dr Omoniyi Akinsiju, IMPI posited that it came to that conclusion after an analysis of the potential impact of the Nigeria Tax Act (NTA) 2025 on the generality of Nigerians.
It said: “This results from the simplified compliance and reduction in tax burden on businesses, particularly Micro, Small, and Medium Enterprises (MSMEs), as enunciated in the NTA 2025. This will foster a more favourable environment for business expansion and job creation. Besides, lowering business taxes (e.g., Corporate Income Tax), as exemplified in the Act, can encourage investment and capital formation, potentially boosting economic growth.
“The overall tax structure, including the progressivity of income taxes, can influence income distribution and aggregate demand, affecting economic growth. This is substantially reflected in the NTA 2025. Section 56 of the Act stipulates that small companies with a gross turnover of 100 million Naira or less per annum and total fixed assets not exceeding 250 million Naira now enjoy zero per cent income tax.
“This is an extension of the threshold for benefiting companies from 25 million Naira in turnover under the 2020 Finance Act to 100 million Naira in the NTA 2025. This higher threshold captures more Nigerian companies, especially those considered to be medium-sized, in categorising companies that are no longer required to pay Company Income Tax (CIT).
“Consequently, companies with a turnover of 100 million Naira and above are now subject to paying CIT of 30%. However, as outlined in the NTA 2025, the 30% rate for large companies can be reduced to 25%, effective from a date to be determined in an Order issued by the President on the advice of the National Economic Council (NEC).”
The policy group also outlined how Nigeria’s workforce would benefit from the new tax laws in terms of higher disposable income.
“The most profound provision of the NTA 2025 is the zero tax charge on the personal income of Nigerians earning between 0 and 800,000 Naira annually. Nothing demonstrates the progressive nature of the new tax laws than this.
“Lowering taxes on labour income (e.g., payroll taxes) can incentivise work and potentially increase the labour supply. Conversely, higher taxes on labour income discourage work and reduce the labour supply, while changes to taxes on capital gains can affect investment decisions and potentially influence employment levels.
“Specifically, the Act increases the tax exemption threshold for compensation for loss of employment or injury from 10 million to 50 million Naira, another disposable income-boosting policy in the NTA 2025.
“We submit that this exposition of the progressivity of income taxes, as captured in the NTA 2025, will influence income distribution and aggregate demand, thereby driving economic growth. We can now envision the impact of the disposable income available to the approximately 5,800,000 wage workers in this category.
“Ninety per cent of salary earners in this category will stop having 19% deducted from their salary, which is approximately 152,000 naira annually. This translates to retained earnings in workers’ pockets and households, leading to increased spending, particularly on fast-moving consumer goods.
“The economic impact of these exemptions is expansion in production by companies involved in manufacturing fast-moving consumer goods, ultimately leading to increased job creation and a key economic terminal point essential to the national economy’s growth.
“The zero tax on Personal Income Tax (PIT) does not imply a loss of revenue for the government. However, the progressivism that underlies the tax law ensures that the trade-off of lost revenue from low-income earners is compensated for by the increase from the former 24% to 25% in the personal income tax rate for Nigerians earning 50 million Naira and above.”
IMPI added that the Tinubu tax reforms have the potentials to transform the Nigerian economic space more than any policy deployment in a generation, if well implemented.
“In the tradition of objective analysts, we have reviewed the new tax laws within the framework of policy contextuality, realism, and pertinence. Our verdict is that Nigeria’s federal administration, led by President Tinubu, has gifted the country a body of legacy fiscal policies with the potential to transform the Nigerian economic space more than any policy deployment in a generation.
“Based on our evaluation, the four tax acts — the Nigeria Tax (Fair Taxation) Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service (Establishment) Act, and the Joint Revenue Board (Establishment) Act — meet all the fiscal conditions required for accelerated and inclusive economic growth.
“By our reckoning, these tax reforms, as reflected in the substance of the four tax acts, alongside the removal of fuel subsidies and the harmonisation of foreign exchange transactions windows, are at the heart of the coordinated effort to reset the Nigerian economy on a sustainable and inclusive growth path,” it surmised.
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