CPPE warns Nigeria’s tax reforms may hurt informal sector
The Centre for the Promotion of Private Enterprise has warned that Nigeria's current tax reform initiatives may negatively impact the informal sector if they are not well planned or correctly implemented.
This caution was articulated in a statement released on Sunday and authored by the organization's Chief Executive Officer, Dr. Muda Yusuf.
The CPPE expressed this concern as the government accelerates efforts to expand the tax base, enhance revenue, and improve compliance throughout the economy.
Dr. Yusuf emphasized that while tax reform is essential, the significant presence of the informal sector in Nigeria's economy necessitates a careful and inclusive strategy to prevent harming livelihoods and impeding business growth.
The CPPE further noted that any legitimate dialogue regarding tax reform must acknowledge the magnitude and importance of the nation's informal economy.
Dr. Yusuf pointed out that Nigeria boasts approximately 40 million micro, small, and nano enterprises, with over 80 percent functioning informally.
He referenced the most recent Labour Force Survey from the National Bureau of Statistics, indicating that more than 90 percent of jobs are located within the informal economy, highlighting its vital contribution to employment and income generation.
"Many informal operators do not possess systematic record-keeping practices and have a limited grasp of tax concepts like Tax Filing responsibilities, Company Income Tax [CIT], Value Added Tax [VAT], Personal Income Tax [PIT], and Withholding Tax," he observed.
"Businesses predominantly operate on a cash basis, have slim profit margins, and frequently lack the literacy and digital skills necessary for compliance. They are also ill-equipped to navigate the technical and often intricate matters associated with taxation."
The CPPE expressed its concerns mainly regarding aspects of the new tax framework that mandate filing obligations, establish specific record-keeping requirements, enforce penalties for non-compliance, and implement presumptive taxation in the absence of adequate records.
Yusuf cautioned that if these actions are not implemented in a careful sequence, they might discourage voluntary formalization and instead push informal businesses further underground.
He also highlighted growing concerns among small and medium-sized enterprises regarding the requirement for banks to report quarterly transactions of N25 million and above to tax authorities.
"The suggested increase in capital gains tax from 10 percent to 30 percent—despite pledges regarding thresholds—has caused unease among investors in the stock market and real estate at a time when confidence is already tenuous," the CPPE stated.
In December, President Bola Tinubu reaffirmed the Federal Government's commitment to advancing the implementation of the new tax laws as scheduled, despite increasing calls for a pause.
He stated that the reforms, which are set to take effect from June 26, 2025, and January 1, 2026, are vital to reconstructing Nigeria's fiscal framework and will not be delayed.
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