FG Launches 1% Presumptive Tax Regime for Informal Sector, Moves to End Cash-Based Tax Collection

In a move to reform tax administration, the Federal Government has ended cash tax collection and barred the use of roadblocks for revenue enforcement in the informal economy.

The directive is contained in the newly signed presumptive
tax regulations and guidelines on the implementation of the tax laws, unveiled
on Tuesday in Abuja.

Speaking at the signing ceremony, Olusegun Adesokan,
executive secretary of the Joint Revenue Board (JRB), said the framework is
designed to eliminate informal, coercive and fragmented tax practices,
particularly at the subnational level.

“It bans all forms of cash collection by tax authorities. It
also bans the mounting of roadblocks for the collection of taxes,” he said.

Adesokan said the regulations are aimed at entrenching
transparency and equity in tax administration, especially within the commerce
and informal sectors.

Under the framework, nano and small businesses with an
annual turnover of N12 million and below are exempted from tax under the
presumptive regime.

“The framework also introduces a tax rate of one per cent of
turnover on all other categories of informal businesses, while encouraging the
use of technology-driven payment platforms,” Adesokun said.

According to the executive secretary, the guidelines provide
a uniform structure for subnational governments to tax the commerce sector and
integrate operators into the formal system through a tax identification
platform.

‘SYSTEM MARKS TRANSITION FROM LEGISLATIVE APPROVAL TO
IMPLEMENTATION’

On his part, Wale Edun, minister of finance and coordinating
minister of the economy, said the signing marks the transition from legislative
approval to implementation of tax reforms enacted in 2025 and early 2026.

“With the signing of these regulations, we are transitioning
from regulation to structured implementation of the tax reforms,” Edun said.

He said the reforms are anchored on transparency, fairness
and economic inclusion, noting that the goal is to expand the tax base rather
than increase tax rates.

“We will expand the tax base, not raising taxes, but
expanding so that each bears his rightful contribution to the common cause,”
the minister said.

Edun added that the regulations were developed in
collaboration with the JRB to ensure alignment across federal, state and local
governments, and that implementation would be closely monitored, with an
ombudsman mechanism introduced to safeguard fairness.

Joseph Tegbe, chairman of the national tax policy
implementation committee, described the signing as a shift from policy
intention to practical execution.

He said the reforms are aimed at correcting distortions in
the tax system and replacing arbitrariness with transparency.

The chairman noted that although the informal sector
accounts for more than 80 percent of Nigeria’s workforce, its contribution to
structured public revenue has remained low due to systemic weaknesses.

Tegbe added that the committee would work with tax
authorities to ensure a disciplined and transparent rollout of the new
framework.

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