FG Moves to Regulate Informal Sector Taxation, Outlaws Cash Collection Practices

The Federal Government of Nigeria has unveiled a new presumptive tax framework introducing a one per cent turnover levy for eligible informal sector businesses while prohibiting cash-based tax collection and roadblock enforcement across the country.

The policy, announced in Abuja, is part of broader tax reform implementation guidelines designed to streamline informal sector taxation in Nigeria.

Executive Secretary of the Joint Revenue Board, Olusegun Adesokan, said the framework aims to eliminate coercive and fragmented tax collection methods, particularly at the subnational level.

He explained that all forms of cash tax collection by authorities are now prohibited, while the use of roadblocks for tax enforcement has also been outlawed.

Under the new arrangement, nano and small businesses with annual turnovers of N12 million and below are exempted from presumptive taxation.

However, other informal businesses are required to pay a flat one per cent tax on turnover, with payments channelled through digital platforms to promote accountability and efficiency.

Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said the signing of the regulations signals the transition from policy formulation to full implementation of tax reforms approved between 2025 and 2026.

He stressed that the reform is not aimed at increasing tax rates but at widening the tax net by integrating more informal sector operators into the formal economy.

Edun added that the regulations were jointly developed with the JRB to ensure harmonised tax administration across federal, state, and local government structures, while an ombudsman mechanism will monitor fairness in enforcement.

Chairman of the National Tax Policy Implementation Committee, Joseph Tegbe, described the initiative as a shift from regulatory approval to practical execution of tax reform.

He noted that although the informal sector accounts for more than 80 per cent of Nigeria’s workforce, its structured revenue contribution remains limited due to systemic challenges.

The committee will collaborate with tax authorities to ensure a transparent and orderly nationwide rollout of the new tax framework.