Ogun State Internal Revenue Service, Chartered Institute of Taxation of Nigeria Unveil Joint Strategy to Strengthen Compliance

Ogun State recently conducted a crucial briefing for traders on the latest tax reforms, a development aimed at fostering greater compliance and economic growth within the state and nationally. These reforms, largely stemming from the comprehensive Nigerian Tax Reform Act, 2025, and preceding Finance Acts, introduce significant changes, including expanded exemptions for low-income earners and the integration of digital payment options. The initiative by the Ogun State Internal Revenue Service (OGIRS), in collaboration with the Chartered Institute of Taxation of Nigeria (CITN), seeks to demystify tax obligations, reduce the burden on vulnerable populations, and streamline tax administration through modern technological solutions. Practitioners must grasp these evolving provisions to effectively advise clients, particularly small-scale entrepreneurs and those in the informal sector, on their updated responsibilities and available reliefs.

The Ogun State Internal Revenue Service (OGIRS), in conjunction with the Chartered Institute of Taxation of Nigeria (CITN), recently engaged traders in a comprehensive briefing on new tax reforms. This sensitisation drive, part of the 2026 Tax Awareness Day campaign, aimed to bridge the historical trust gap between the government and the informal sector, ensuring a clearer understanding of evolving tax obligations. The initiative underscores a broader national effort to modernise Nigeria's fiscal framework, simplify tax laws, and enhance revenue generation while promoting fairness and inclusivity.

The reforms discussed are pivotal for practitioners, as they introduce substantial changes to personal income taxation, particularly for low-income earners, and champion the adoption of digital payment solutions. These updates are primarily driven by the Nigerian Tax Reform Act, 2025, and various Finance Acts, which collectively represent a significant overhaul of the country's tax landscape. Understanding these legislative shifts is crucial for legal professionals advising individuals and businesses on compliance, planning, and dispute resolution within Ogun State and across Nigeria.

This article will delve into the statutory and doctrinal context of these reforms, analyse their specific provisions regarding low-income exemptions and digital payments, and discuss their practical implications for legal practitioners and taxpayers alike. It will highlight the shift towards a more progressive and technologically integrated tax system, emphasising the need for continuous adaptation by all stakeholders.

Nigeria's tax system operates on a multi-tiered structure, with the Federal Inland Revenue Service (FIRS) administering federal taxes and State Boards of Internal Revenue, such as the Ogun State Internal Revenue Service (OGIRS), managing state-level taxes. The primary legislation governing individual taxation is the Personal Income Tax Act (PITA), Cap. P8, Laws of the Federation of Nigeria, 2004, which has undergone several amendments through various Finance Acts.

Significant reforms were introduced through the Finance Acts of 2019, 2020, 2021, and 2023, which sought to align Nigeria's tax laws with global best practices, promote fiscal equity, and support small and medium-sized enterprises. Notably, the Finance Act 2020 exempted individuals earning the National Minimum Wage or less from personal income tax, a measure designed to cushion the impact of taxation on low-income earners. The National Minimum Wage Act, 2019, sets the threshold for this exemption. These incremental changes paved the way for the more comprehensive overhaul embodied in the Nigerian Tax Reform Act, 2025.

The Nigerian Tax Reform Act, 2025, signed into law in June 2025 and effective January 1, 2026, represents the most ambitious restructuring of Nigeria's fiscal framework in decades. This Act repeals and consolidates several existing tax laws, including PITA, into a unified legislation. It aims to simplify tax administration, expand the tax base, and modernise compliance, introducing a more progressive personal income tax regime and establishing the Joint Revenue Board (JRB) to harmonise tax administration across all tiers of government.

The recent briefing in Ogun State highlighted two critical aspects of the ongoing tax reforms: exemptions for low-income earners and the adoption of digital payment options. Regarding exemptions, the Ogun State Internal Revenue Service (OGIRS) Chairman, Mr. Olugbenga Olaleye, clarified that new tax legislation exempts workers earning ₦800,000 or less annually from personal income tax (PAYE). This significantly updates the previous exemption tied to the National Minimum Wage (N30,000 per month or N360,000 annually) as introduced by the Finance Act 2020. This higher threshold under the Nigerian Tax Reform Act, 2025, demonstrates a clear policy direction to alleviate the tax burden on a broader segment of low-income earners and the informal sector, encouraging voluntary compliance by making the system more equitable.

The push for digital payment options is another cornerstone of these reforms. The Director of Tax Operations for OGIRS, Oladele Zaka, emphasised the convenience offered by digital platforms like Taxpro-Max (e-tax), which facilitates self-assessment and payment from anywhere. This aligns with the broader national strategy, where the Joint Revenue Board (JRB) has been tasked with launching a comprehensive digital platform for seamless tax filing and payments, with initiatives like automated Tax ID verification already in place. The Finance Act 2021 also introduced provisions for the taxation of the digital economy, including a Digital Services Tax (DST) and expanded withholding tax to cover digital transactions, further solidifying the digital-first approach to tax administration.

These reforms, particularly the Nigerian Tax Reform Act, 2025, introduce a more progressive personal income tax regime with revised income bands and changes to personal reliefs, replacing the Consolidated Relief Allowance with a capped rent relief for eligible taxpayers. While the intent is to simplify tax laws and promote fairness, the transition requires careful navigation. The emphasis on proper record-keeping for small taxpayers and the informal sector is crucial for accurately ascertaining income and determining eligibility for exemptions. Without adequate records, taxpayers may face challenges in substantiating their income levels, potentially leading to incorrect assessments.

Furthermore, the establishment of the Joint Revenue Board (JRB) with a stronger mandate to harmonise and coordinate tax administration across federal, state, and local governments is a significant institutional change. This aims to reduce conflicts and inconsistencies in the tax system, which has historically been a challenge for taxpayers and practitioners. The integration of the National Identification Number (NIN) as a unique Tax Identification Number (TIN) further streamlines compliance and enhances data accuracy across government agencies.

However, the success of these reforms hinges on effective implementation, sustained taxpayer education, and robust institutional capacity. While the legislative framework is in place, the practical challenges of educating a diverse taxpayer base, particularly in the informal sector, and ensuring the seamless operation of digital platforms remain. The OGIRS's ongoing sensitisation efforts are vital in this regard, but continuous engagement and support will be necessary to achieve the desired levels of voluntary compliance and revenue growth.

The tax reforms currently being implemented in Ogun State, driven by the Nigerian Tax Reform Act, 2025, and earlier Finance Acts, mark a transformative period for tax administration in Nigeria. The increased exemption threshold for low-income earners to ₦800,000 annually and the robust push for digital payment platforms are significant steps towards a more equitable, efficient, and transparent tax system. These changes aim to foster a friendly tax environment, encourage voluntary compliance, and ultimately boost national and state revenue generation.

For legal practitioners, these reforms necessitate a thorough understanding of the updated Personal Income Tax Act provisions, the implications of the new exemption thresholds, and the operational aspects of digital tax administration. Advising clients, especially small-scale traders and those in the informal sector, on the importance of accurate record-keeping and the benefits of digital compliance will be paramount. Practitioners should also monitor further guidelines from OGIRS and the Joint Revenue Board to ensure their advice remains current, helping clients navigate the evolving tax landscape and leverage the benefits of these progressive reforms.