CPPE urges phased implementation of tax reform

Nigeria’s tax reform has triggered widespread public anxiety and resistance, as households and businesses already stretched by high inflation and weak incomes brace for new compliance demands.

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Amid the growing noise, the Centre for the Promotion of Private Enterprise (CPPE) has warned that the reform risks failure unless it is implemented gradually and with sensitivity to economic and political realities.

In a policy note signed by its CEO, Muda Yusuf, on Sunday, the policy think tank said Nigeria’s tax reform is one of the most ambitious fiscal restructuring efforts in recent decades.

“Nigeria’s ongoing tax reform ranks among the most ambitious fiscal restructuring efforts in recent decades. Conceptually, it is a sound and progressive framework—aimed at strengthening revenue mobilisation, improving equity, simplifying the tax system, and aligning fiscal policy with economic diversification and growth objectives.

“However, history offers a sobering lesson: good policy design does not guarantee good outcomes. The ultimate success or failure of Nigeria’s tax reform will depend far less on its legislative provisions and far more on how it is implemented. Without careful sequencing, political sensitivity, and economic realism, even well-intentioned reforms can trigger resistance, disrupt livelihoods, and further erode public trust,” it said.

The warning comes as Nigerians continue to grapple with the aftershocks of fuel subsidy removal, foreign exchange reforms and persistently high living costs.

Many households are experiencing declining purchasing power, while businesses face rising energy, transport and financing costs.

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Against this backdrop, expectations of full and immediate tax compliance have met strong resistance across social media, business associations and informal trade groups.

Despite the backlash, CPPE acknowledged that the reform contains pro-welfare provisions. These include exemptions for low-income earners, value added tax relief on basic goods and essential services such as education, healthcare and agriculture, as well as tax reliefs for small businesses.

If properly implemented, CPPE said, these measures could ease pressure on vulnerable groups and support economic diversification.

However, public scepticism remains rooted in experience. Many Nigerians associate past reforms with higher prices and reduced welfare, with little evidence that increased government revenue translates into better public services.

CPPE said this weak social contract continues to fuel resistance, making trust as important as technical design.

The organisation also highlighted the scale of Nigeria’s informal economy as a major risk to the reform. About 40 million micro, small and nano enterprises operate across the country, accounting for more than 90 per cent of jobs, according to the National Bureau of Statistics. Most lack proper records, operate on thin margins and have limited capacity to comply with complex tax requirements.

Under the current framework, mandatory filing obligations, record-keeping standards and penalties for non-compliance could expose informal operators to sanctions if introduced too aggressively. CPPE warned that this approach risks criminalising informality rather than encouraging gradual and voluntary formalisation.

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Several provisions have further heightened concern. These include the mandatory reporting of bank transactions for certain amount, which some small businesses fear could trigger scrutiny of pass-through funds. Proposed increases in capital gains tax and limits on rent relief have also unsettled investors and middle-income earners at a fragile moment for confidence.

CPPE urged tax authorities to prioritise revenue efficiency by focusing enforcement on large companies, established SMEs and high-net-worth individuals, who account for the bulk of tax revenue.

It also warned that aggressive enforcement ahead of the 2026 pre-election period could provoke social backlash and undermine reform stability.

“Tax reform is a process, not an event,” the organisation said, calling for a phased, pragmatic approach anchored on trust, economic realities and political timing.