Chairman of the Nigeria Revenue Service (NRS), Dr. Zacch Adedeji, has disclosed that Nigeria currently lacks a legal and administrative framework to tax operators in the informal sector, stressing that existing tax laws were designed primarily for the formal economy.
Adedeji made the disclosure on Wednesday during an interaction with the Editorial Board of THISDAY in Abuja while addressing the implementation of the country’s newly enacted tax laws.
Why Informal Businesses Cannot Be Taxed
According to the NRS boss, informal businesses fall outside the reach of taxation until they are formally registered and categorised.
“You cannot tax what is informal—that is why they are called informal,” Adedeji said. “To tax them, you must first formalise them. Once they register and grow, they fall into proper tax categories.”
He explained that the government’s strategy focuses on education, engagement and incentives to encourage informal operators to transition into the formal economy.
“Our goal is to help small businesses grow or, at the very least, sustain themselves,” he added.
VAT Not Targeting Poor Nigerians
Adedeji dismissed claims that the Value Added Tax (VAT) regime burdens poor Nigerians, describing VAT as a consumption tax with exemptions.
He said the Nigeria Tax Administration Act (NTAA) 2025 was specifically designed to remove tax pressure from vulnerable citizens.
“VAT is not imposed on the poor,” he said. “The reforms ensure that only income or profit is taxed—not capital or investments.
No Business Shutdowns Under New Regime
The NRS chairman assured businesses that no enterprise would be shut down for tax noncompliance, noting that enforcement now prioritises guidance over punishment.
“I am not here to suffocate businesses,” Adedeji said. “If a business does not make profit, there is nothing to tax.”
He explained that tax service partners have been embedded into operations to assist businesses with compliance, while audits are conducted alongside tax officers to prevent revenue leakages without disrupting operations.
Why Tax Credit Scheme Was Abolished
Adedeji revealed that the tax credit scheme was discontinued due to widespread abuse and administrative limitations.
“Tax credit turned tax authorities into project supervisors, which we are not equipped to be,” he said, adding that assessing infrastructure projects was outside the NRS’ technical competence.
VAT Reforms Boost States, Control Food Inflation
The NRS chairman described VAT reforms as one of the most impactful fiscal interventions, noting that states now receive increased financial allocations.
He also said the federal government’s decision to exempt food and agricultural items from VAT was aimed at curbing food inflation and protecting consumers.
Tax Compliance Is Not Optional
While emphasising a business-friendly approach, Adedeji stressed that tax compliance remains a legal obligation.
“Tax compliance is the law—it is not optional,” he said, noting that citizens in developed economies often pay up to 40 per cent of their income in taxes.
He added that accountability applies equally to government officials, stating that public scrutiny of tax spending has increased.
“The era of taking citizens for granted is over,” Adedeji said.
Bank Account Balances Not Taxable
Addressing public concerns, Adedeji clarified that individual bank account balances cannot be taxed.
“Your bank account is your asset. Nobody has the right to tax your bank balance,” he said. “Money in your account does not automatically mean profit.”
He also explained that salaries are deductible expenses and that tax remittance serves as proof of payment, making the system largely self-regulating.
Transparency, Trust Key to Reform Success
Adedeji identified information gaps as the biggest challenge facing tax reform implementation, assuring Nigerians that feedback would shape ongoing adjustments.
“Trust is critical,” he said. “Transparency and rule of law are non-negotiable. Everything must be open.”
