FG Introduces 1% Presumptive Tax for Informal Sector

The federal government has unveiled new presumptive tax regulations introducing a one percent turnover tax on certain informal businesses while banning cash-based tax collections nationwide.

The directive was announced on Tuesday in Abuja during the signing of the new regulations and implementation guidelines.

Speaking at the event, Olusegun Adesokan, executive secretary of the Joint Revenue Board (JRB), said the framework is designed to eliminate coercive and fragmented tax practices, particularly at state and local government levels.

According to him, the new rules expressly prohibit tax authorities from collecting levies in cash and from mounting roadblocks to enforce tax payments in the informal sector.

He explained that the objective is to entrench transparency, fairness, and uniformity in tax administration, especially within the commerce and informal segments of the economy.

Under the new framework, nano and small businesses with an annual turnover of N12 million and below are exempted from paying tax under the presumptive regime. For other eligible informal businesses above that threshold, a flat one per cent tax on turnover will apply.

Adesokan added that the system encourages the adoption of technology-driven payment platforms and provides a harmonised structure for subnational governments to assess and collect taxes from informal operators. The initiative is also expected to integrate more businesses into the formal economy through a tax identification system.

Shift from Reform Laws to Implementation

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

He noted that the reforms are anchored on transparency, equity, and economic inclusion, stressing that the government’s goal is to widen the tax base rather than raise tax rates.

Also speaking, Joseph Tegbe, chairman of the national tax policy implementation committee, described the development as a move from policy design to practical execution.

He observed that although the informal sector accounts for over 80 per cent of Nigeria’s workforce, its contribution to public revenue has remained relatively low due to systemic inefficiencies and inconsistent enforcement practices.

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Tegbe said the committee would collaborate with tax authorities across federal, state, and local governments to ensure disciplined and transparent implementation, with oversight mechanisms, including an ombudsman process, to protect taxpayers and promote fairness.