President Bola Tinubu signed four groundbreaking tax bills into law on June 26, 2025, marking the most comprehensive overhaul of Nigeria's tax system in a decade. These reforms aim to boost government revenue, streamline tax administration, and expand the tax net to cover Nigeria's large informal economy.
The Four Key Tax Bills
1. Digital Tax Administration Act
Mandates full automation of all tax collection processes by December 2025
2. Informal Sector Taxation Act
Creates framework for taxing micro-businesses and artisans
3. Harmonized Revenue Act
Establishes single portal for all government payments
4. Tax Incentives Amendment
Rewards early compliance with 5-15% tax rebates
Key Provisions and Effective Dates
| Reform | Effective Date | Key Requirement |
|---|---|---|
| Digital Tax Collection | January 1, 2026 | All states must implement approved digital tax platforms |
| Informal Sector Tax | March 1, 2026 | Minimum 50% coverage of informal businesses |
| Single Tax Portal | July 1, 2026 | Unified payment system across all MDAs |
Impact on State Governments
The reforms introduce both challenges and opportunities for state governments:
Mandatory Requirements
- Full digitization of tax collection processes by deadline
- Integration with Federal Inland Revenue Service (FIRS) systems
- Monthly reporting of informal sector coverage metrics
Incentives Structure
- Early Compliance Bonus: 5% increase in federal allocation for states meeting 2025 deadlines
- Performance Grants: Up to ₦2 billion for states exceeding informal sector targets
- Technical Support: Federal funding for technology infrastructure
Critical Deadline
All states must submit their digital transition plans to the Ministry of Finance by October 31, 2025 to qualify for implementation support funds.
Preparing for Implementation
State governments should take these immediate steps:
- Conduct technology audit of existing tax systems
- Establish task force for reform implementation
- Begin stakeholder engagement with market associations and transport unions
- Budget for technology upgrades in 2026 fiscal plans
Conclusion
The 2025 tax reforms represent a fundamental shift in Nigeria's revenue generation approach. While the changes require significant adaptation, they offer states unprecedented opportunities to increase IGR and modernize their tax administration systems. State governments that act swiftly to implement these reforms stand to benefit most from the available incentives and support mechanisms.