Over two weeks after the new tax laws have taken off, little is known about them by most segments of the Nigerian population. The tax laws — the Nigeria Tax Act, 2025; the Nigeria Tax Administration Act, 2025; the Joint Revenue Board of Nigeria (Establishment) Act, 2025 and the Nigeria Revenue Service (Establishment) Act, 2025 — literally stole into circulation with little education and enlightenment heralding them.
Hence, a slew of unsettling misconceptions have continued to whirl among the populace about a tax policy, widely touted by the government, to relieve the low-income earners of tax burden.
“You will pay less or no tax if you are in the bottom 98 per cent of income earners,”
the man at the centre of implementing the tax laws, Taiwo Oyedele, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, had enthused shortly before the takeoff of the laws on January 1, 2026.
Under the new tax system, according to him, low and middle-income earners, small-scale businesses, and even large companies will experience significant relief.
The pro-people component of the legislations is ordinarily laudable. But we are at odds with the tax authority over the hastiness in the implementation of the laws.
Why are they (tax laws) being rushed into circulation without adequate offline publicity in a society that is plagued with a very low tax awareness and low tax-compliance trajectory?
It is odious that most of the enlightenment efforts have been concentrated on a few traditional media and online channels through social media influencers, in a communication ecosystem where a larger segment of the population have no smart phones.
We would have expected the government to complement the elitist media publicity with a wide offline enlightenment engagements through town hall meetings with communities, coordinated by state chapters of the National Orientation Agency (NOA).
Cogent provisions in the tax laws, especially about the citizens’ obligations and benefits as well as implications of default, ought to also have been broken down into easy-to-understand messages, published in pamphlets in different languages and circulated in crowd-pulling channels such as markets, churches, mosques and other strategic places. This will adequately educate the people about the nitty gritty of the laws, preempt misconceptions and ease compliance.
The paucity of information in the public space has, however, created a fertile ground for all kinds of misconceptions or misinformation about the new tax legislations. One of such misconceptions that has gained so much traction is the impression that Value Added Tax (VAT) would be charged directly on bank transfers and other customer transactions.
The concern about this misinformation has created a lot of needless frenzy online. Many customers have ignorantly fretted about it. Many posts have emerged online, admonishing people to put all kinds of funny descriptions such as “gift,” “loan,” “feeding,” etc in the ‘narration’ column whenever they make inter-bank transfers just to escape being taxed!
But the Nigeria Revenue Service (NRS) has laid the buzz to rest by clarifying that the 7.5 percent VAT will apply only to charges collected by banks for their services and not to the actual money transferred by customers.
A statement issued last Thursday said VAT has always applied to banking services under Nigeria’s tax system and was not introduced by the new Nigeria Tax Act.
The statement, signed by the Special Adviser on Media to the NRS Chairman, Dare Adekanmbi, said the new law did not create any fresh tax burden on bank customers.
It clarified: “The Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard,” adding that claims circulating in sections of the media that VAT is being newly imposed on electronic money transfers, banking fees, or commissions are false.
“The Nigeria Revenue Service wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect,” it said.
According to the NRS, VAT has always applied to service charges collected by banks and other financial institutions.
“VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime,” the statement explained, stressing that VAT is charged only on the service provided by the bank and not on the amount of money a customer transfers or withdraws.
“VAT is not charged on the amount of money transferred or withdrawn. It applies only to the service charge or commission imposed by the bank… For example, if a bank charges ₦10 for a transfer, VAT of 7.5 per cent, which is ₦0.75, applies to that ₦10 charge, not to the amount being transferred.”
The service also clarified that interest earned on savings accounts, fixed deposits, and similar bank deposits is not subject to VAT, because “Interest income is not a supply of goods or services and therefore does not attract VAT under the Nigeria Tax Act.”
The service also addressed concerns about the cost of living, saying basic food items and essential goods remain exempt from VAT under the law.
“The Nigeria Tax Act expressly exempts basic food items and essential goods from VAT to protect consumers and reduce the cost of living,” it said.
The NRS added that essential medical services, pharmaceutical products, tuition, and core educational services provided by recognised institutions are also exempt from VAT.
Financial experts, who have been dissecting the tax laws, have also attempted to address two of other wrong narratives, especially around the payment of income tax, many of which are said to be emanating from individuals or businesses who have been evading income taxes.
They include the fear that Nigerians will pay higher income taxes from January 1, 2026 with the introduction of the new laws and that money in individual bank accounts would be automatically taxed by the government.
However, according to financial experts, the reality is that the income tax paid by majority of Nigerians will reduce following the new personal income tax provisions in the Nigerian Tax Act, 2025, which exempt individuals earning N800,000 and below per annum from paying income tax.
The import of this is that Nigerians earning minimum wage or below will pay zero income tax. This is because ‘Taxable income,’ as provided in the law, is simply the part of the total income that can be taxed after allowable deductions have been made.
Under the Nigerian Tax Act, 2025, experts say, a person can deduct the following from his or her gross income to get his or her ‘Taxable income’: National Health Insurance Scheme (NHIS) contribution (5% of salary for most employees); annual rent (corresponding to 20% of the rent up to a maximum of N500,000); National Housing Fund deduction (2.5% of gross pay); Employee Pension contribution (8% of employee salary) and life insurance premium for his or her spouse.
Experts have also dispelled the fear that taxes would be automatically deducted from the bank account of Nigerians. It is suspected that this misconception may have emanated from the provisions in section 29 of the Nigeria Tax Administration Act, which mandates banks and other financial institutions to furnish the tax authority on a quarterly basis information (names and addresses) about their customers with cumulative monthly transactions of N25 million and above for individuals or N100 million and above for a body corporate.
According to financial buffs, even though the information will help the tax authority to know eligible taxpayers evading taxes, the provision does not amount to automatic deduction of taxes from the accounts.
According to them, if a person’s monthly cumulative transactions as an individual do not amount to N25 million and above or from N100 million for corporate bodies, this provision does not concern him or her in any way.
Only about 5% of the population, experts surmise, have bank accounts that have more than half a million in them. So, in essence, more than 90% of Nigerians, which includes all the poor and vulnerable people in Nigeria, are not affected by this provision.
The NRS further explained that the focus of the Nigerian Tax Act is on compliance and enforcement rather than the introduction of new VAT rules.
“What changed is compliance and enforcement, not the law,” Adekanmbi explained, adding: “Financial institutions are being reminded of their existing obligation to remit VAT already charged and collected from customers.”
He said the Nigeria Tax Act did not introduce any new VAT burden on ordinary Nigerians, especially in areas such as savings, food, healthcare, and education.
“The Act did not introduce VAT on savings, basic food, medical care, education, or essential consumption. Claims suggesting otherwise are misleading and incorrect,” Adekanmbi said.
“The Nigeria Revenue Service urges members of the public and all stakeholders to disregard misinformation and to rely exclusively on official communications for accurate, authoritative, and up-to-date tax information.”
Like we posited earlier, lack of adequate awareness about the tax laws has created room for misinformation to thrive. So, we believe the best way to put paid to further spread of misconceptions about the laws is for the government to heed the popular admonition to suspend the implementation and launch a wide offline enlightenment blitz, as suggested earlier, about everything the generality of Nigerians need to know about the new tax laws.
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