ABUJA, April 9 – Nigeria has introduced a turnover-based tax framework aimed at expanding compliance within the informal sector, setting a 1% levy on businesses with annual revenue above N12 million.
The policy, backed by regulations signed by Minister of Finance Wale Edun, shifts tax assessment for small and informal enterprises from profit to turnover.
Businesses earning N12 million or less annually are exempt, while those above the threshold will be required to pay a fixed percentage of their revenue.
The new system is designed to simplify tax collection, particularly for operators who do not maintain detailed financial records. By applying a flat rate to turnover, authorities aim to bring more businesses into the tax net and improve overall revenue mobilisation.
However, early concerns have emerged around the impact on low-margin businesses. Because the tax is applied to revenue rather than profit, traders with thin margins may face higher relative tax burdens compared to more profitable firms.
Implementation also presents challenges with many informal businesses operating largely in cash and lack formal accounting systems, making it difficult to accurately determine turnover. This could create room for underreporting and complicate enforcement efforts.
In addition, multiple levies at the local government level remain a concern for small business owners, who often face overlapping charges from different authorities. Analysts note that without better coordination, these existing burdens could affect compliance under the new regime.
While the framework encourages the adoption of digital tools to improve transparency, limited access to such systems among informal operators may slow uptake.
Similar turnover-based tax models in countries such as Kenya and India have broadened the tax base, but required strong administrative systems and sustained taxpayer education to deliver results.
