Revamped tax policy to place Nigeria amongst 50 top economies — Tax professor, Teju Somorin
yarkarkara
… says current tax reforms most comprehensive since 1939
Professor Olateju Somorin, popularly known in the industry as Teju Tax is one of the most knowledgeable and regarded tax professionals on the continent. After her retirement from the Federal Inland Revenue Service in 2010 following a 15-year stint as a director- the first female in the parastatal’s history, she became the president of the Chartered Institute of Taxation of Nigeria, CITN. She was also the first female president of the West African Union of Tax Institutes, WAUTI. She is currently, the dean of the largest faculty at Caleb University and was dean of Postgraduate Studies at the same institution prior to this. She is a member of the Global Tax Advisers Forum amongst other global bodies.
She has unique insights into the latest tax reforms and shares them with Vanguard.
What is your opinion of the new tax reforms?
I am very excited. This is not the first time we have been having tax reforms in Nigeria. There was one in 1957, 1978, 1991 which I was opportuned to be the president of the tax committee. There were tax reforms in 2003 and 2004. We also had tax reforms by way of Finance Acts 2023 and 2024. These are all tax reforms but these current ones have a very comprehensive and broad terms of reference and they are poised to address the challenges confronting the Nigerian tax system. These current reforms are out to harmonise all the multiple taxes and levies at different levels of government to unify revenue collection functions into a single agency, to modernize and simplify the tax system including the use of technology for revenue administration; to leverage on data for intelligence in order to cut tax evasion and aggressive tax avoidance.
It aims to remove tax provisions that serve as impediments to business and economic growth in order to improve efficiency in revenue collection and ultimately drive voluntary compliance. Also to increase tax to GDP ratio to at least 18 per cent by next year in order to promote economic growth. Moreover the current reforms which gave birth to the 4 Tax Acts 2025, are the most significant and comprehensive overhaul of the Nigerian tax system since 1939 when the Stamp Duties Act was enacted.
The reforms have collapsed multiple tax statutes into four individual Acts; The Nigerian Tax Act, NTA, The Nigerian Tax Administration Act, NTAA, The Nigerian Revenue Service Act, NRSA, and do not forget the Federal Inland Revenue Service will be replaced by Nigerian Revenue Service come 1st January, 2026.
The last is the Joint Revenue Board Act, JRBA, which also establishes the office of the tax ombuds.
These make up a landmark legislation. They have repealed altogether 10 principal laws, One subsidiary law while they have amended 12 principal laws and two subsidiary laws. Collectively they are out to revolutionise the Nigerian fiscal landscape. So many sweeping changes have been introduced which promise to transform the revenue generation landscape fundamentally. They are so detailed and all sectors of the economy are to benefit.
The reforms are very positive. Households, individuals, low income earners , high networth individuals , businesses, manufacturers, the three tiers of government, real estate will all benefit. Even the capital market. It is a laudable effort.
Tax policies clearly have to be agile and responsive to the changing socio political landscape. Do these policies pass the test?
Yes. Let us differentiate between tax policy and National Tax Policy. Tax policy is the formal articulated and documented set of fundamental principles that guide the tax system of a country. Tax policy defines the types of taxes to be collected, at what rates subject to what exemptions and deductions and who will pay the taxes. On the contrary, National Tax Policy is a document that you can see and feel, first developed in 2012. It sets out the fundamental principles to guide the orderly development of Nigerian tax system and reinforces the need for tax laws and administrative practices that will promote economic development. The launch document of 2012 was revised five years later in 2017 under the leadership of Kemi Adeosun, as Minister of Finance.
Currently, the Presidential Committee on Fiscal Policy and Tax Reforms has been mandated to overhaul the 2017 National Tax Policy document. There is a new draft of the 2017 National Tax Policy in the offing that will entrench transparency, fiscal prudence and long term sustainability in the management of government revenues and expenditures. It is still a draft so the draft proposal seeks to institutionalize the framework that would eliminate fiscal inefficiencies across NDAs, guide government revenue expectations, expenditure planning and the fiscal deficit threshold. The draft is to be transmitted to the FEC for review and then the National Assembly for necessary legislative action. This is the stage we are now. When passed, the 2025 National Tax Policy will ensure discipline of the fiscal system. The revamped policy aims to place Nigeria among the top 50 economies, strengthen fiscal federalism and deliver sustainable revenue growth.
You have been advocating for the mainstreaming of tax education especially for the youngsters
I am a strong advocate of tax education not only for youngsters but adults. Tax education is the process of teaching about the principles, regulations and implications of taxation; their role in public services and the importance of voluntary compliance. Quite a number of Nigerians do not know what taxes they owe to the government and what tax payments are for. Some people even wonder why they have to pay tax at all.
Questions have been asked on why government should collect taxes when it can simply print money. Tax knowledge is crucial for all from the knowledge of how to file a tax return to knowledge of different tax types. When payers do not understand the tax system they are likely to get confused and make mistakes that could lead to sanctions. Bringing tax education to schools ensures young people grow up ready to navigate financial and taxation landscape.
All in all, tax education would enable tax payers know their rights including rights to object to tax assessment, for taxpayer to be aggrieved, right to file an appeal and the right to legal representation, chartered accountant or tax adviser.
The digital age is here. What implications does it have on taxation whether positive or negative?
The digital age is simply an era that is characterised by a rapid shift from traditional industry. It has transformed tax systems in ways that are unimaginable years ago. As economies shift towards digital platforms, governments are also adapting tax policies capture revenue from digital businesses, online transactions and intangible assets.
Let us run through the positive implications. One is education. Online resources have made knowledge more accessible. Nations are adapting laws and regulations to address the competitiveness of the digital economy. Companies are introducing Digital Policies, DAP to tax foreign companies. Nigeria introduced Significant Economic Presence rules- SAP to ensure that non digital plans contribute to tax revenue. Digital payment systems ensures efficiency in tax collection. Also tax authorities have gone from sensing tax notices through the postal service to using email. Authorities have gone from face to face tax conferences to virtual and video sessions.
Webinars are now very common.
Others are enhanced visibility, better decision making reduced fraud and tax evasion.
E-commerce allows government to tax previously untaxed sectors and streamline processes to make payments more accesible. Blockchain prevents tax avoidance and promotes accountability.
On the contrary, my first concern is the issue of AI. More people will not be employed because we will be using machines and robots. Robots do not pay tax so it will affect revenue.
Multinational technical companies operate accross borders. This will make it harder to determine the right tax to be paid.
Another one is tax avoidance and evasion. Technical giants and multinational cooperations leverage on digital loopholes to minimise liabilities. Likewise government struggles to define taxable digital services in a clear manner.
There are also challenges in taxing cryptocurrencies and digital assets. Another challenge is the jurisdictional issues such as cross border transactions which complicate where and how digital revenue should be taxed.
Nigeria has been adapting its tax policies just as other developed countries. Nigeria introduced policy to ensure that digital businesses contribute their fair share.
A 6 per cent tax has been imposed on non residents. It introduced something called two pillar Solution: pillar one and pillar two, to address challenges arising from digital economy. Under the finance of 1991 Nigeria amended its value added tax to include non resident companies. Companies like Netflix, Amazon, Facebook and Zoom have been charging VAT for services rendered to Nigerian users.
There has been talk about developing a tax value chain. How does this work?
A typical tax compliance value chain breaks down tax compliance into some stages where value is created by moving from potential non compliance to full compliance so the value chain is just talking about compliance issues in the system. There are stages which include registration with the tax authorities, filing, payments and reconciliation, audits and dispute resolution.
At each of these stages processes and incentives encourage timely compliance and by mapping and optimising these points authorities can close leakage gaps.
With respect to global value chains tax policies must be identified where economic value is created and profits are located appropriately but then there are challenges . A clear understanding of how value flows across borders is also critical for coherent international tax policy.
By building a tax value chain, you increase revenues by plugging holes in the compliance process and align to digitalised economies and company corporate structures.
There are steps to take to develop a robust tax value chain such as as defining KPIs for each compliance stage and find legal frameworks for each overlap and duplication. These have been addressed under the current tax reforms.
Despite these efforts, there is still little awareness in the grassroots on tax in Nigeria.
There are different types of tax. I agree with you but it seems the current tax reforms is out to close some of these gaps in the grassroots. The efforts are not enough. One of the gaps is communication gaps. Tax messaging are always sent out in English and formal channels. Communication is hampered at that level.
FIRS and LIRS and Lagos have some programmes in local languages and in pidgin. They should intensify on this.
Printed material and online material should penetrate rural areas more because at that level there is no internet connectivity. Some of the issues are being addressed by the presidential tax reforms. From January 2026 we will see a lot of improvement in this area including the informal sector which is more than 65% of Nigerian workforce.
The post Revamped tax policy to place Nigeria amongst 50 top economies — Tax professor, Teju Somorin appeared first on Vanguard News.
