Nigeria's tax authorities have long grappled with the challenge of bringing the country's vast informal sector into the tax net. A significant portion of economic activity, from roadside traders to small-scale artisans, operates outside formal structures, limiting government revenue and creating an uneven playing field between compliant and non-compliant businesses.
Recent legislative reforms have introduced simplified tax return mechanisms specifically tailored for micro-enterprises. These provisions recognise that the standard corporate tax compliance framework, with its detailed bookkeeping requirements and complex filing procedures, imposes a disproportionate burden on the smallest operators.
Under the current regime, micro-enterprises with annual turnover below ₦25 million are exempt from Companies Income Tax, a measure that removes the tax liability entirely for the smallest businesses while still encouraging registration and filing. Companies falling within the medium bracket, with turnover above ₦25 million but not exceeding ₦100 million, benefit from a reduced corporate tax rate of 20%, compared to the standard 30% applicable to larger entities.
The simplified return framework reduces the volume of information required, allowing business owners to declare income without the extensive schedules and computations demanded of larger taxpayers. The intent is to make compliance accessible to operators who may lack professional accounting support, thereby lowering the barrier to formalisation.
The Federal Inland Revenue Service has also been expanding its taxpayer education outreach, using radio programmes, market visits, and digital platforms to demystify tax obligations for informal traders and micro-business owners. These efforts complement the simplified filing provisions by ensuring that the affected population understands what is required and how to comply.
Critically, the law differentiates between those who genuinely cannot bear the administrative cost of full compliance and those who simply avoid taxation. The simplified return is not a concession for tax avoidance but a structured pathway into the system, with the expectation that as businesses grow, they will graduate to standard filing requirements.
For Nigeria, where the informal sector accounts for a substantial share of employment and output, formalising micro-enterprises through simplified taxation is both a revenue strategy and a governance imperative. Bringing these operators into the system creates data trails that can inform policy, improve access to credit for the businesses themselves, and broaden the tax base sustainably.
