New tax regime: Concerns among businesses as 2026 approaches

There are palpable fears among business owners, especially operators of small and medium-sized enterprises (SMEs), over what lies ahead as implementation of the new tax regime begins on January 1, 2026.

Many of the concerns centre on the likelihood of abuse by state and local government agents, with fears that the new tax laws could be used as tools for harassment and extortion of businesses that are yet to fully understand the scope and implications of the reforms.

Responding to these worries, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr. Taiwo Oyedele, said the new regime is designed to eliminate, not encourage, such practices.

“The new tax laws clearly prohibit multiple taxation and unauthorised levies by any tier of government. Any agency or official acting outside the law is doing so illegally and will be sanctioned,” Oyedele said.

“No business should be stopped on the road or at its premises to demand taxes or permits that are not provided for under the law.”

Also weighing in, Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Zach Adedeji, said the reforms mark a shift from coercive tax collection to voluntary compliance built on trust and clarity.

“Taxation under the new regime is not about intimidation or force. It is about clarity, fairness and voluntary compliance,” Adedeji said.

“Any form of harassment of taxpayers by unauthorised persons is unacceptable and will not be tolerated.”

Under the Nigeria Tax Administration Act (NTAA), 2025, which forms the backbone of the new regime, tax administration across the federation is standardised to end multiple taxation, arbitrary levies and harassment of taxpayers.

The Act clearly defines who can collect taxes, how taxes are to be collected and the limits of enforcement powers. It prohibits cash-based collections, roadblocks and on-the-spot tax demands, mandating that all tax payments be made through approved, traceable channels.

The law also harmonises taxes, levies and fees across federal, state and local governments, with an approved schedule specifying what each tier of government can collect. Any levy not listed is deemed illegal.

To protect small businesses and low-income earners, the Act introduces clear thresholds, exemptions and simplified compliance requirements for SMEs, while also providing penalties for tax officials or agents who abuse their powers.

For Fatai Ayoola, who runs a logistics business in Lagos, the fear is that January 2026 may usher in additional financial burdens.

Despite assurances that the reforms aim to reduce multiple taxation and ease the tax burden on low-income earners and small businesses, Ayoola expressed scepticism that the policy would work in favour of businesses like his.

“Those local government guys have always been a problem to businesses like us. They stop us at every corner, asking for one permit or the other, especially when out for delivery. Is the new tax law taking care of this menace constituted by these guys to businesses? If not, what it simply means is that while I think about how to sort these people out, I would also be thinking of sorting myself out with the new tax agency,” he stated.

Oyedele directly addressed this concern, stressing that enforcement powers under the new regime are streamlined and centralised.

“Local governments do not have the power to randomly stop businesses or vehicles to collect taxes. Taxes will be paid through clear, digital and traceable channels,” he said.

“If anyone demands cash or threatens a business outside the framework of the law, that is extortion, not taxation,” he added.

Adedeji reinforced this position, noting that FIRS is strengthening monitoring and reporting mechanisms in line with the NTAA, 2025.

“We are deploying technology to ensure transparency in tax payments. Payments will be traceable, receipted and verifiable. There will be no room for cash collection or informal arrangements,” he said.

But to Ayoola, clearer communication would help calm nerves.

“I think government needs to do more in terms of enlightenment, especially for our category of business to enable us fully understand what to expect next year,” he stated.

Both officials agreed on the need for sustained taxpayer education. According to Oyedele: “Between now and 2026, there will be sustained engagement with SMEs, trade associations and informal sector operators to ensure they understand their obligations and protections under the law.”

Adedeji added: “Our focus is to educate before we enforce. We want taxpayers to understand the rules, the benefits and the reliefs available to them.”

Another operator, Showumi Abbas, who runs a printing business, raised concerns about premature and incorrect application of the new rules, particularly on withholding tax.

“For instance, our clients have started asking for withholding tax for every transaction, despite the fact that the volume of such transaction cannot be said to fall under those expected to pay tax. They charge us withholding tax for a transaction that is even below ₦100,000, and when you protest they tell you that’s what the new law says, even when the implementation is yet to start. Honestly, it’s a source of concern,” Abbas added.

Oyedele dismissed such practices as misinterpretation of the law.

“The new tax laws are not yet in force, and no one should apply them ahead of January 1, 2026,” he said.

“Even when implementation begins, thresholds and exemptions are clearly defined. Small transactions and vulnerable businesses are protected,” he said.

Adedeji also warned businesses and tax agents against abuse.

“Any organisation deducting taxes wrongly or ahead of the commencement date is acting outside the law. Such actions can be reported, and corrective steps will be taken,” he said.

For Adams Makinde, a Lagos-based fashion designer, the concern is that local government officials have begun hinting at increases in levies payable by small businesses.

“I was thinking the new policy had harmonised all these levies. Having to grapple with levy increment from the local government, and also the new tax regime, may affect this business that is still trying to recover from the various reforms of the federal government,” he said.

Oyedele clarified that levy harmonisation is a core objective of the reform under the NTAA, 2025.

“No local government is allowed to introduce new levies or increase existing ones arbitrarily under the new regime,” he stated.

“Harmonisation means fewer taxes, not higher ones,” he said.

The Act stipulates that only taxes and levies backed by law will be enforceable.

If a levy is not listed in the approved schedule under the Nigeria Tax Administration Act, it should not be paid. The committee is working with states and local governments to ensure alignment and compliance.

However, a finance and public affairs analyst Adesuyi, argued that beyond compliance issues, the reforms raise deeper structural questions, particularly around fiscal federalism.

“While it is good that the new tax policy intends to harmonise the various taxes and bring more people into the tax net, it however favours some lazy regions or state governments,” he said.

“Whatever you make from VAT, including accruals from cigarettes and alcohol, will still be shared by states that oppose the sale of those items,” he stated.

Responding, Oyedele said the reforms balance productivity with national equity.

“Fiscal federalism does not mean abandoning national cohesion. The reforms increase efficiency and reward productivity while maintaining fairness across the federation,” he said.

As January 2026 approaches, stakeholders agree that the success of the new tax regime will hinge on disciplined enforcement of the Nigeria Tax Administration Act, 2025, transparency, and continuous engagement with businesses and citizens.