Your Tax Questions, Answered: Making Sense of Nigeria’s Tax Reform
“Wetin you know about the new tax reform?”
“Tax? As in house tax or road? Them fit talk am, but me I no know anything.”
These were the exact words of a trader on the street as she described her oblivion to the new tax reforms and how it affects her livelihood. For many traders and informal workers across Nigeria, this uncertainty is common.
Even as these issues gain attention in policy spaces, the gap in awareness remains. So we went to the streets to listen. The voices of traders, freelancers, and small business owners not only revealed their experiences, but also shaped the questions we took to the Tax Dialogue at the Purple Book Launch.
Some of these questions have been answered by the Chairman of Tax Reform Committee, and newly appointed Minister, Taiwo Oyedele who was represented by Albert Folorunsho from the Presidential Fiscal Policy and Tax Reform Committee.
Q: How can I pay my tax as an informal worker, and what percentage do I pay?
A: Informal workers include traders, freelancers, small business owners, and anyone earning outside formal employment. You are still expected to pay personal income tax, but it is based on your profit, not your total sales.
This means:
- After deducting your business expenses, such as the cost of goods, rent, and other running costs, what is left is your profit, and that is what is taxed.
- The tax system is progressive. The more you earn, the higher the percentage you pay.
| Income Bracket | Tax Rate |
| First ₦800,000 | 0% |
| Next ₦2.2M | 15% |
| Next ₦9M | 18% |
| Next ₦13M | 21% |
| Next ₦25M | 23% |
| Above ₦50M | 25% |
In reality, many informal workers may not earn enough to pay taxes at all. Some states also have simpler tax systems for small earners.
Q: If I don’t have a job, am I required to pay tax?
A: No. Tax is based on income or profit. If you are not employed and do not earn income from any trade, business, or investment, you do not need to pay tax. However, there are practical challenges, such as needing a tax clearance certificate for certain transactions. There are ongoing conversations about how to better handle this for people without income.
Q: Can I know which purchases are tax-free?
A: This depends on the type of tax being discussed. There is no such thing as “income tax-free purchases,” but some goods and services are not charged Value Added Tax, also known as VAT. Others are zero rated, meaning VAT may have been paid earlier, but the final buyer does not pay it. Zero-rated items may have had VAT paid earlier in the supply chain, but the final sale is taxed at 0%, which could allow for refunds. Understanding the difference is important, especially for business owners who are buying and selling goods.
Q: Are there businesses that are exempt from tax?
A: Yes, some businesses are exempt depending on their size and the type of work they do.
Small registered businesses that earn below a certain amount may not have to pay company income tax. Some sectors such as agriculture, manufacturing, and certain tech industries may also receive tax relief or incentives for a period of time.
However, many of these benefits only apply to businesses that are properly registered.
Q: How can Nigerians know how their taxes are being used? What are the benefits?
A: It is the government’s responsibility to explain how tax money is spent.
There are expectations that systems will be created where Nigerians can clearly see how funds are used. While this is not fully in place yet, there are signs that more transparency may come with ongoing reforms.
Q: Were women’s voices included in the tax reform process?
A: Public hearings were open to everyone, but women’s participation was low. Experts call for intentional engagement to ensure women’s perspectives shape policies
Q: Are the needs for persons with disabilities reflected in the law?
A: Yes. Equipment's such as mobility aids and assistive devices is now fully exempt from tax.
These questions came from real Nigerians, and your voice belongs in this conversation too. The Purple Book captures more discussions and policy recommendations for a more inclusive Nigeria.
Download it here to explore more.
We want to hear from you: Do you feel the new tax reform speaks to you? Drop your thoughts in the comments and join the conversation.
