Category: Breaking News

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele, says the reduction of Company Income Tax (CIT) to 25 per cent and the introduction of zero per cent CIT for firms with annual turnover of N100 million or below will significantly benefit Small and Medium Enterprises (SMEs) and other corporate organisations in Nigeria.

Oyedele stated this on Monday during a workshop with business correspondents in Lagos.

He explained that the new tax regime, introduced under recently signed tax reform acts by President Bola Tinubu, reduced the CIT rate from 30 per cent to 25 per cent, while granting tax relief to small businesses to encourage growth and formalisation.

According to Oyedele, making the business environment easier for small enterprises would enable them to grow progressively into larger corporations and eventually multinationals, thereby strengthening the Nigerian economy.

“If we make life easy for them, nano businesses will become micro, micro will become small, small will become medium, medium will become large, and large will become multinational companies.

“That is how we can build Nigerian multinationals earning billions of dollars, so that when oil prices fall, the country does not panic,” he said.

He noted that the zero per cent CIT for companies with turnover not exceeding N100 million was designed to encourage informal businesses to formalise, stressing that the benefits of formalisation go beyond tax incentives.

“The real benefit of formalisation is organisation and discipline. You appoint directors, keep minutes, prepare audited financial statements and proper records. That discipline improves survival, supports scaling, and enhances access to credit and investors,” Oyedele said.

He added that the growth of SMEs would have a broader and more inclusive impact on the economy, noting that expansion within the informal sector contributes more significantly to national economic growth.

“If all big companies grow by 40 per cent, less than 0.001 per cent of Nigerians will feel it. But if the informal sector grows by two per cent, the entire country grows by two per cent,” he said.

Oyedele also highlighted key Value Added Tax (VAT) reforms under the new tax laws, particularly the introduction of input VAT credits, which will take effect from January 2026.

He explained that businesses would now be able to claim input VAT credits on assets, overheads, services and inventory, a provision that was previously restricted under the old law.

“This translates to about N3.4 trillion, based on 2024 VAT collections. That is the amount the government is effectively returning to businesses next year through input VAT credits,” he said.

On zero-rated VAT items, Oyedele clarified that essential goods and services such as food, education and healthcare would now be zero-rated rather than VAT-exempt, meaning VAT would be charged at zero per cent and refunded to producers.

He said this policy would reduce production costs and ultimately lower prices for consumers.

“Bread, education and healthcare are now zero-rated. Tuition fees attract VAT at zero per cent, while VAT incurred on laptops, boards and other educational materials will be refunded, reducing the cost of education,” he said.

Oyedele added that transportation and rent would remain VAT-exempt due to their complexity.

He stressed that the overarching objective of the reforms was to stimulate economic growth, describing growth as the most sustainable path to increased government revenue.

“You cannot collect personal income tax from an unemployed person. If you want people to pay taxes, start by creating jobs or enabling them to become employers. That is the magic of economic growth,” he said.

The committee chairman also raised concerns about tax multiplicity at the state level, describing it as a major challenge to business sustainability.

He said that while 63 taxes and levies were officially recognised, businesses faced over 200 unofficial taxes across the country, discouraging compliance and investment.

“States are encouraged to be efficient, not creative in inventing new taxes. Multiple taxation kills the system. People pay more, but government collects less,” Oyedele said.

He disclosed that the committee had identified taxes that could be addressed through new legislation and had also submitted proposals requiring constitutional amendments to the National Assembly.

According to him, a model tax harmonisation law has been drafted for states to adopt, with implementation expected by December or early January.

On account monitoring provisions in the new tax law, Oyedele clarified that banks would only report accounts with transactions of N25 million or more within a quarter, equivalent to N100 million annually.

He attributed public opposition to misinformation and low trust in government, urging citizens to seek accurate information.

Oyedele further noted that the reforms would improve Nigeria’s global competitiveness and investment climate, particularly in areas such as business process outsourcing (BPO).

He said Nigeria had lost significant opportunities in the global outsourcing market due largely to unfavourable tax policies.

“If we fix our tax system, revenue will come naturally. Let Nigerian businesses grow, become multinationals and earn foreign exchange. That is how the economy will truly transform,” he said.