The New Tax Regime

In the new tax regime scheduled to commence in January 2026, individuals earning ₦800,000 or less per annum will now be exempt from tax on their income and gains, while higher-income earners will be taxed at a higher rate up to 25%. This is progressive taxation.

The more you earn, the higher the percentage of your income that you pay as tax. The more productive you are, the more you are taxed. People who already contribute more to the economy are made to pay more in taxes, LOL.

These relatively more productive people, because they pay more in taxes, have less to save and invest in even more productive ventures.

Progressive taxation is not about economic justice. Its focus is social justice. It's not about wealth creation; it's about its distribution. Those who earn more subsidise those who earn less. It’s therefore also about solidarity.

The expectation is that the government pools these resources to act on everyone’s behalf by spending on common goods: day-to-day running of government, administration of justice, security, defence, and public works.

In advanced countries where the rate of taxation is even higher, taxpayers don’t have to worry about paying for their children’s primary and secondary school education. They are free. Some countries even fund university education from general taxation. Some countries—the absolute example is the UK—provide free healthcare services.

But in Nigeria, those who earn enough to pay so much in taxes are also the same people who pay hundreds of thousands as school fees for the basic education of their children. This is not simply because they can afford it—it’s because the education provided by the government is largely free only in name. It’s often useless. It’s actually very expensive in the long run.

It’s never been more imperative for taxpayers to hold the government accountable.

Moving forward...

Strengthen Public Services: The government must prioritize improving public education, healthcare, and infrastructure to ensure taxpayers see value for their contributions. For example, investing in teacher training and school facilities could make public education a viable option.

Taxpayer advocacy: High earners and the middle class could form or support advocacy groups to push for accountability and better service delivery.

Incentives for productivity: To address concerns about disincentivizing productivity, the government could introduce tax breaks or incentives for investments in key sectors (e.g., entrepreneurship, tech, or agriculture).

Anti-corruption measures: Robust mechanisms to curb mismanagement of public funds would increase trust in the tax system.

The government also needs to bring into the net the considerable number of people who earn more than NGN800,000 but are outside the organized sector and are currently not being taxed.