Amanze Chinonye
Nigeria’s ongoing tax reform, one of the most ambitious fiscal restructuring efforts in recent decades, risks failure if implementation is not carefully sequenced, socially sensitive and politically timed, the Centre for the Promotion of Private Enterprise (CPPE) has warned.
In a policy position released by CPPE, it described the reform framework as conceptually sound and progressive, noting that it is designed to strengthen revenue mobilisation, improve equity, simplify the tax system and align fiscal policy with economic diversification and growth. However, the group cautioned that good legislative design alone would not guarantee success.
According to CPPE, Nigeria’s history shows that poorly implemented reforms, even when well intentioned, can provoke resistance, disrupt livelihoods and further erode public trust. It stressed that the current tax reform is unfolding at a particularly fragile economic moment, marked by high inflation, weakened purchasing power and adjustment pressures from fuel subsidy removal and foreign exchange reforms.
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The group noted that many households and businesses are already experiencing “reform fatigue,” warning that a rigid and enforcement-heavy approach could undermine the credibility of the tax reform before its benefits are felt.
Despite widespread public controversy, CPPE acknowledged several positive elements in the reform. These include personal income tax exemptions for low-income earners, value-added tax relief on basic goods and essential services such as education, healthcare and agriculture, as well as company income tax and VAT relief for small businesses. It also highlighted targeted incentives for priority and job-creating sectors, the rationalisation of multiple taxes and the repeal of obsolete tax laws as steps that could improve predictability and investor confidence if properly implemented.
However, CPPE said public resistance to the reform is rooted not only in communication gaps but also in lived experience. Many Nigerians, it observed, associate past reforms with higher living costs and declining welfare, without corresponding improvements in public services. This weak social contract, the group said, has reduced tolerance for new compliance demands at a time when economic recovery remains fragile.
The organisation further warned that the scale of Nigeria’s informal economy cannot be ignored. With an estimated 40 million micro, small and nano enterprises more than 80 per cent operating informally CPPE argued that mandatory filing requirements, record-keeping standards, penalties and presumptive taxation could end up criminalising informality rather than encouraging gradual formalisation.
Concerns were also raised over specific provisions in the tax framework, including the mandatory reporting of quarterly bank transactions of ₦25 million and above, which CPPE said could expose high-turnover, low-margin businesses to undue scrutiny. It added that the proposed increase in capital gains tax from 10 per cent to 30 per cent has unsettled investors in the stock market and real estate sector, while the ₦500,000 annual rent relief cap was described as misaligned with current urban housing costs.
CPPE called for a revenue-efficiency-driven enforcement strategy, arguing that a small proportion of taxpayers account for the bulk of tax revenues. It estimated that about 20 per cent of businesses generate close to 90 per cent of tax receipts, while a similar proportion of taxpayers contribute over 80 per cent of personal income tax.
Focusing enforcement on large corporations, established SMEs and high-net-worth individuals, it said, would yield significant revenue without destabilising livelihoods.
In the short to medium term, the group urged tax authorities to prioritise the formal sector, while integrating the informal sector gradually through incentives, sustained tax education, simplified compliance tools and digital onboarding support.
With 2026 expected to be a politically sensitive pre-election year, CPPE warned that aggressive, broad-based enforcement could fuel social discontent and political backlash, potentially leading to reform reversal.
“Tax reform is essential for Nigeria’s fiscal sustainability, but implementation strategy will ultimately determine success or failure,” CPPE said, calling for a phased, pragmatic and trust-based approach anchored on economic realities and political timing.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
