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FG Contemplates Tax Reform For Small Businesses

President Tinubu’s administration has received ample criticism for being heavy-handed with taxes, with the recently introduced 0.5% cyber security levy on digital transactions adding to the burden. However, there are signs of a potential shift in tax policy.

In a newly proposed tax reform, businesses with earnings less than N25 million ($17,000) per year would be exempt from taxes. The businesses that fall under this category constitute a significant portion of Nigeria’s informal economy, contributing 57.7% to the GDP in 2022 and playing a crucial role in employment amidst rising unemployment rates.

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The government announced this move as a means to cushion the effect of the overwhelming 33% inflation rate, which severely hampers the operation of these businesses. The exemption would cover withholding tax, company income tax, and payroll taxes.

This is very important as Nigeria boasts the largest informal economy in sub-Saharan Africa yet still strives with high inflation rates that impair businesses’ viability. By relieving these enterprises of tax obligations, the government aims to provide relief, potentially enabling them to survive, sustain employment, and eventually bolster economic growth.

However, the proposed reforms are not expected to take effect until 2026. Currently, they are undergoing consultations with the private sector and will subsequently be reviewed by the National Assembly.

Techrectory with Agency Report.

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