The Centre for the Promotion of Private Enterprise (CPPE) has warned that Nigeria’s ongoing tax reform drive could undermine the informal sector if it is not carefully designed and properly sequenced.
This is according to a statement issued by the organisation and signed by its Chief Executive Officer, Dr. Muda Yusuf, on Sunday.
The warning comes amid broader efforts by the government to expand the tax net, raise revenue, and strengthen compliance across the economy.
Dr. Yusuf said that although tax reform is needed, Nigeria’s largely informal economy calls for a cautious, inclusive approach to avoid harming livelihoods and business growth.
What CPPE is saying
According to CPPE, any meaningful tax reform conversation must recognise the scale and role of Nigeria’s informal economy.
Dr. Yusuf stated that Nigeria has an estimated 40 million micro, small, and nano enterprises, with over 80% operating informally.
Citing the latest National Bureau of Statistics (NBS) Labour Force Survey, he said over 90% of jobs are in the informal economy, making it central to employment and income generation.
“Most informal operators lack structured record-keeping systems and have limited understanding of tax concepts such as Tax Filing obligations, Company Income Tax [CIT], Value Added Tax [VAT], Personal Income Tax [PIT], Withholding Tax etc,” he noted.
“Businesses are largely cash-based, operate on thin margins, and often lack the literacy and digital capacity required for compliance. They also lack the capacity to digest the technical and somewhat complex issues around taxation,” he added.
CPPE’s concerns are largely driven by provisions in the new tax framework, which introduce mandatory filing requirements, defined record-keeping standards, penalties for non-compliance, and presumptive taxation where records are inadequate.
Yusuf warned that without proper sequencing, these measures could discourage voluntary formalisation and instead push informal businesses further into the shadows.
He also highlighted growing anxiety among SMEs over the requirement for mandatory reporting of quarterly bank transactions of N25 million and above to tax authorities.
According to him, many small businesses handle pass-through or custodial funds that do not constitute income, exposing high-turnover, low-margin firms to undue scrutiny and costly compliance disputes.
“The proposed increase in capital gains tax from 10 per cent to 30 per cent—despite assurances around thresholds—has unsettled investors in the stock market and real estate at a time when confidence remains fragile,” CPPE said.
He also argued that the N500,000 annual rent relief cap does not reflect current urban housing costs and could further erode middle-class disposable income.
The organisation further expressed concern about the wide enforcement powers granted to tax authorities and the severity of penalties embedded in the new tax laws, warning that excessive enforcement could stifle enterprise growth.
What you should know
In December, President Bola Tinubu reaffirmed the Federal Government’s commitment to implementing the new tax laws as scheduled, despite calls for their suspension.
The President said the reforms, already rolling out from June 26, 2025, and January 1, 2026, are key to rebuilding Nigeria’s fiscal framework and will not be stopped.
Signed into law by President Tinubu on June 26, 2025, the Acts took effect on January 1, 2026, marking a comprehensive overhaul of Nigeria’s tax system.
