The Centre for the Promotion of Private Enterprise (CPPE) has called for a strategic implementation framework that prioritises revenue efficiency over blanket enforcement measures as the new tax laws kick off.
The Centre made the call in a statement on Sunday by its Chief Executive Officer, Muda Yusuf, citing a specific issue in the tax laws that concerns small businesses and households.
It stressed that revenue efficiency should guide enforcement, asserting that empirical evidence shows that a small proportion of taxpayers account for the bulk of tax revenue.
“Roughly 20 per cent of businesses generate close to 90 per cent of tax receipts, while about 20 per cent of taxpayers contribute over 80 per cent of personal income tax.
“Concentrating enforcement on large corporations, established SMEs, and high-net-worth individuals will deliver substantial revenue gains without destabilising livelihoods or deepening social resistance,” CPPE stated.
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It urged the tax authorities to, in the short to medium term, prioritise the formal sector first, where compliance capacity already exists.
It further urged them to gradually integrate the informal sector through incentives, sustained tax education, simplified compliance tools, and digital onboarding support.
“Shifting the emphasis from penalties to compliance-building will produce more durable outcomes. The objective should be to grow the tax net organically, not force it prematurely,” CPPE said.
Several provisions raise concerns
The CPPE highlighted that several provisions and regulations have intensified concerns among small businesses and households.
It cited that the mandatory reporting of quarterly bank transactions of ₦25 million and above to the tax authority raises anxiety among SMEs that handle pass-through or custodial funds that do not constitute income.
“High-turnover, low-margin businesses risk undue scrutiny and costly compliance disputes,” the Centre maintained.
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It also raises concern that the proposed increase in capital gains tax from 10 per cent to 30 per cent—despite assurances around thresholds—has unsettled investors in the stock market and real estate at a time when confidence remains fragile.
Similarly, it believes that the ₦500,000 annual rent relief cap is misaligned with prevailing urban housing costs and risks further squeezing middle-class disposable income.
It also raised worries over what it described as wide enforcement powers granted to tax authorities and the severity of penalties and sanctions embedded in the tax laws.
The informal sector’s reality can’t be ignored
With an estimated 40 million micro, small, and nano enterprises—over 80 per cent operating informally—the CPPE noted that most informal operators lack structured record-keeping systems.
They also have a limited understanding of tax concepts, including tax filing obligations, company income tax (CIT), value-added tax (VAT), personal income tax (PIT), and withholding tax.
“Businesses are largely cash-based, operate on thin margins, and often lack the literacy and digital capacity required for compliance.
“They also lack the capacity to digest the technical and somewhat complex issues around taxation,” the Centre said.
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It stated that the new tax framework introduces mandatory filing requirements, defined record-keeping standards, penalties for non-compliance, and presumptive taxation where records are inadequate.
“Without careful sequencing, these provisions risk criminalising informality rather than encouraging gradual and voluntary formalisation,” it warned.
The ultimate success or failure of Nigeria’s tax reform will depend far less on its legislative provisions and far more on how it is implemented.
Tax reform must grow with the economy
Tax reform is essential for Nigeria’s fiscal sustainability, but the implementation strategy will ultimately determine success or failure.
“A phased, pragmatic, and socially sensitive approach—anchored on trust, economic realities, and political timing—offers the most credible pathway to sustainable revenue growth, expanded compliance, and long-term legitimacy,” the CPPE added.
Commendable provisions
The CPPE also highlighted that despite public controversy, the tax reform framework contains several commendable and pro-welfare provisions.
It said these include the low-income earners’ exemption from personal income tax and VAT relief on basic goods and essential services—including education, healthcare, agriculture, and cultural activities—that provide important social protection.
Added is that small businesses benefit from relief from CIT and VAT obligations, easing compliance pressures on vulnerable enterprises.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
