Introduction
Taxes are meant to fund public services like healthcare and education, and to reduce inequality. The rich in Nigeria pay very low, if any, taxes, especially when compared to other countries. This is one of the reasons that we suffer from very poor public services and very high inequality. The 2025 Tax Laws will make very little difference. The trade unions should campaign further for more progressive taxation as one of their key demands.
In June 2025, President Tinubu assented to four tax laws. These changes will provide only very minor gains, if any, for working peoples. We hope that the reduction in the number of taxes will lead to a reduction in the level of extortion for those working in the informal economy. Below, we review the main changes and how these may affect working people.
Personal Income Tax
For most workers, the changes to personal income tax will not make a big difference. Inflation will still erode their income. A few very rich people, such as senators, may pay slightly more tax. But the highest tax rate is only 25% in Nigeria, compared to 45% in Britain and South Africa, and 37% in the US. This means income tax here does little to reduce inequality.
Workers earning the minimum wage or less do not now pay income tax, but many other low‑income workers still do. The table below shows examples of how much tax is paid at different salary levels, and the small savings under the new laws.
| Monthly gross pay | Monthly Income Tax paid 2025 N % | Monthly Income Tax paid 2026 N % | Monthly Savings N | ||
| N70k – minimum wage | 3,327 | 5 | 0 | 0 | 3,327 |
| N100k – GL7 | 6,500 | 7 | 5,000 | 5 | 1,500 |
| N150k – GL10 | 12,967 | 9 | 12,500 | 8 | 467 |
| N250k – GL15 | 29,167 | 12 | 27,500 | 11 | 1,667 |
| N1m – Above Director | 170,667 | 17 | 162,500 | 16 | 8,167 |
| N12m – Senator? | 2,257,867 | 19 | 2,827,500 | 24 | (569,633) |
The above rates are taken from the official tax calculator – http://bit.ly/PITCalculatorNg
All workers do not have to pay any tax on the first nearly N67,000 of their monthly salary (N800k a year). In addition, certain deductions are allowed against the gross salary to reduce taxable income. These include 20% of housing rent up to a maximum of ₦500,000 (but this may be difficult to claim if the landlord is not registered with the tax authorities or there is no formal rental agreement). And other deductions against tax are allowed, these include contributions made to the National Housing Fund, contributions to National or State Health Insurance Schemes, Pension contributions, annuity and life insurance premiums, interest on mortgage for a residential house. These allowances will reduce the tax due, especially for better paid workers and the rich.
There was a fear that people would have to pay tax on their bank balances or transfers. There is only a very minor change in this area. Bank transfers of more than ₦10,000 suffer Stamp Duty of ₦50 as before (although the name has changed). This tax is now paid by the sender, not the person receiving the bank transfer (as was the case before). Transfers for the payment of salaries are exempt from Stamp Duty.
Value Added Tax (VAT)
The VAT rate is staying at 7.5%. Food, health, education, accommodation and electricity are exempt. States and local governments will now receive a larger share of the VAT revenue.
Corporate Income Tax
Businesses will not have to pay taxes (VAT and Corporate Income Tax) until their annual turnover reaches 50 million naira. This is twice times the previous level. Income tax for large companies is proposed to be reduced from 30% to 25%.
At independence Nigeria’s, corporation tax was 45 per cent. This continued until 1979 and then it was gradually reduced as part of the neoliberal reforms. There is international competition to reduce company taxation rates to try to attract foreign direct investment. This includes tax free zones where companies are exempt from most taxes. This includes the site of the Dangote refinery in Lagos. Nigeria is not being successful at attracting foreign investors due to poor infrastructure. These changes will mean that large companies are due to pay even less tax.
Low Taxation
The overall rate of tax paid by rich individuals and companies has increased over the last few years in Nigeria. It was one of the lowest in the world and is now approaching the African average. But it is still far lower than South Africa, for example, and less than Ghana. The following graph shows the position from a couple of years ago:
Rich individuals and companies are certainly not paying the full amount of tax that they are legally required to pay. It is estimated by the Chair of the Presidential Fiscal Policy & Tax Reforms Committee that on average companies only pay 30% of the taxes that they are due to pay. The target for 2025 was that they should pay at least 60% of their due taxes. In addition, the new laws provide a series of tax exemptions for companies to further reduce the tax that they are due to pay.
According to a recent government study, at least 99% of the super-rich avoid paying their legal level of taxes – a compliance rate of just 0.035%. Of the 115,000 individuals ‘earning’ more than N40 million at year, only 40 were paying even the legally required levels of income tax.
Conclusions
A fair tax system should reduce inequality. If the rich paid their fair share, the government could afford a decent minimum wage and invest more in health and education. This would save lives, reduce deaths from common diseases, and help millions of children return to school. Trade unions should campaign more strongly for fairer and more equitable taxation.
People were quite rightly angry at the suggestion that the gazetted Tax Laws had been changed from those past by the National Assembly. However, the alleged changes will have almost no impact on working people.
Tax the rich! Leave the poor alone!
For more details see the following two reports:
https://www.oxfam.org/en/research/africas-inequality-crisis-and-rise-super-rich