Nigeria’s tax system is undergoing its biggest transformation since independence, with the Federal Government exempting food, education, shared transport, and agriculture from value-added tax (VAT).

The landmark reforms, designed to ease the burden on citizens and businesses while boosting government revenue, were announced by Zacch Adedeji, Executive Chairman of the Federal Inland Revenue Service (FIRS).

Speaking during an interview marking his second year in office, Adedeji credited President Bola Tinubu with fulfilling his campaign promise to simplify tax compliance and support business growth.

The new consolidated tax code, scheduled to take effect in January, merges multiple tax laws into a single framework.

It reduces the number of tax types to single digits, simplifies filing, and introduces sweeping reliefs for small businesses and low-income earners.

Under the code, businesses with annual turnover below ₦50 million will no longer pay tax, while personal income tax thresholds have been adjusted to shield vulnerable households.

This, according to Adedeji, will make compliance easier and expand the tax base without stifling growth.

Tinubu signed four key bills into law—the Nigeria Tax Act on June 26, this year, such as Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act.

Collectively known as the “Tax Acts quartet,” these laws broaden the tax base, strengthen compliance, and boost transparency across all tiers of government.

The reforms have been shaped by the Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele of PwC, and composed of experts from both public and private sectors.

Nigeria’s tax-to-GDP ratio has already improved from 10 per cent to 13.5% within two years, with a target of 18% by 2027.

In August, the federation account disbursed a record ₦2 trillion, nearly 70% of which came from taxes. Adedeji disclosed that 30 states have repaid ₦1.85 trillion in debts over the past 18 months, while debt servicing costs have fallen sharply from 90% of government revenue to about 50%. He added that external reserves are also growing on the back of improved fiscal stability. F

As part of the changes, the FIRS will have a new name, the Nigeria Revenue Service, to align its role in collecting taxes for all tiers of government.

“The word ‘federal’ gave the wrong impression that we only collect for the federal government, whereas 90 per cent of VAT belongs to the states,” Adedeji explained.

The rebranded agency will also restructure operations by grouping taxpayers into small, medium, and large categories, with one-stop shops for filing and payments.

“We are service providers to taxpayers rather than just an enforcement agency,” Adedeji stressed.

Adedeji admitted the reforms have caused short-term hardship, likening them to “the pain of a woman in labour.”

But he highlighted interventions such as compressed natural gas buses and crude-for-naira support for refiners, which he said are already easing the pressure on fuel prices.

On concerns over a proposed petrol surcharge, he clarified that it would only apply if activated by a ministerial order and gazetted officially.

Urging Nigerians to embrace the changes, he concluded: “When companies are expanding and making profits, we will all benefit.

Our task is to remove hurdles in their way, and that is what the president has done with these reforms.”