Lagos State Unveils Progressive Tax Regime: Majority to Benefit from Reduced or Zero Taxation
The Lagos State Internal Revenue Service (LIRS) has announced groundbreaking details about Nigeria's newly implemented tax framework, revealing that the vast majority of taxpayers in the state will experience significant relief rather than increased burdens. According to comprehensive analysis conducted by the revenue agency, only a minimal fraction of Lagos residents will face higher tax obligations under this transformative fiscal policy.
Comprehensive Data Analysis Reveals Widespread Tax Relief
An extensive examination of 1,494,491 anonymized tax records from the 2024 tax year has produced compelling evidence about the new regime's impact. The data demonstrates that merely 1.6% of Lagos taxpayers will encounter increased tax responsibilities under the revised laws. In stark contrast, approximately 98% of workers across the state will either benefit from reduced taxation or complete exemption from tax payments.
During a detailed media briefing at the LIRS headquarters in Ikeja, Special Adviser to the Executive Chairman Tokunbo Akande presented specific figures that underscore the reform's progressive nature. The recalculated data indicates that 54.54% of taxpayers will pay absolutely zero tax, while 43.9% will contribute less than they did under the previous tax framework.
Protection for Vulnerable Earners and Economic Stimulus
The new tax legislation has been strategically designed to shield low-income earners and protect minimum wage workers from taxation entirely. Akande emphasized that individuals earning N800,000 or less annually will be completely exempt from tax obligations under this framework. Furthermore, those receiving the national minimum wage or below will remain tax-free, even if future adjustments increase the minimum wage threshold.
Akande characterized this tax regime as Nigeria's most significant fiscal reform since independence, highlighting its dual purpose of supporting business expansion while enhancing consumer purchasing power. The framework deliberately prioritizes low-income earners, small businesses, and the middle class, while maintaining neutrality for high-income individuals. This balanced approach aims to protect vulnerable populations without discouraging large-scale commercial activities that drive economic growth.
Capital Gains Tax Alignment and Compliance Deadlines
The reforms extend to capital gains taxation, where significant adjustments have been implemented to promote fairness across different income types. Under the previous system, gains from selling shares or property were taxed at 10%, even when these returns matched profits generated by factories and other productive enterprises that faced higher taxation rates.
The new legislation addresses this disparity by taxing capital gains at the same rate as personal or corporate income, depending on the specific nature of the earnings. This alignment ensures that speculative income receives equivalent tax treatment to productive investment returns, creating a more equitable fiscal environment.
LIRS officials have simultaneously urged companies to submit their annual tax returns for the previous year well before the January 31 deadline. Akande cautioned that last-minute filings could overwhelm the electronic filing platform, potentially causing processing delays for businesses attempting to meet compliance requirements.
Addressing Artificial Transactions and Enforcement Measures
The revenue service has issued stern warnings against artificial or fictitious transactions designed to reduce tax obligations. Under Section 46 of the NTAA 2025, any transaction deemed artificial or fictitious—particularly those resulting in diminished tax liability—may be disregarded or adjusted by relevant tax authorities.
This provision extends to transactions between connected parties, including related companies or individuals. Such dealings will be treated as artificial if they fail to meet arm's length standards, meaning they must reflect terms that independent entities would typically agree upon in normal commercial circumstances.
The comprehensive tax reform represents a fundamental shift in Nigeria's fiscal policy landscape, with Lagos State positioned at the forefront of implementing these progressive changes. By exempting the majority of taxpayers while maintaining revenue collection from higher earners, the state aims to stimulate economic activity while ensuring sustainable public financing for essential services and infrastructure development.
