The Federal Government has announced the introduction of a 1 per cent presumptive tax on total revenue for businesses operating in the informal sector, in a bid to widen the country’s tax base and formalize economic activities outside the formal economy.
Under the new policy, traders, welders, mechanics, tailors, shop owners, and other small-scale operators with annual sales exceeding ₦12 million are now required to pay 1 per cent of their total annual turnover as tax. Businesses earning ₦12 million or less annually are exempt from the tax.
The government has also banned cash collection of taxes and roadside enforcement, including the use of roadblocks by tax officials. Payments are expected to be made through digital platforms, ensuring transparency, reducing harassment, and promoting compliance.
The policy, which took effect in March 2026 under the supervision of the Federal Ministry of Finance and Coordinating Ministry of the Economy, is part of broader fiscal reforms aimed at expanding government revenue, formalizing the informal sector, and improving tax administration.
Authorities have pledged to carry out digital registration drives and taxpayer education to ensure that informal businesses can comply efficiently with the new regime. Officials stress that the move is designed to tax prosperity, not poverty, protecting smaller businesses while integrating larger operators into the formal tax system.
