For years, one of Nigeria’s biggest tax challenges has been the informal economy.

Millions of small businesses operate every day without formal bookkeeping, audited accounts, or tax returns. While these businesses contribute significantly to economic activity, many remain outside the country’s tax system.

Nigeria’s new tax reforms are attempting to change that through a system known as Presumptive Tax.

Rather than calculating tax from declared profits, presumptive tax allows tax authorities to estimate a business’s tax liability where proper financial records do not exist. The assessment can consider factors such as the nature of the business, its location, customer traffic, and estimated turnover instead of audited accounts.

The idea is simple: businesses that cannot provide reliable financial records should still have a fair and structured way to meet their tax obligations.

This approach isn’t unique to Nigeria. Several countries already use presumptive taxation to improve compliance among small businesses that operate largely in cash or have limited accounting systems.

One of the biggest reasons for introducing the policy is the size of Nigeria’s informal sector. A large percentage of businesses still operate outside the formal tax system despite contributing significantly to the economy. Expanding the tax net has become a major priority under the ongoing tax reforms.

The regulations also introduce clearer guidelines for determining tax liability. Businesses may be assessed using estimated turnover where necessary, while those that maintain proper financial records can continue under the regular self-assessment system.

Supporters believe the policy could improve tax compliance, reduce disputes over estimated assessments, and simplify taxation for many small businesses.

Critics, however, argue that implementation will determine its success. Estimating a business’s income without proper records can easily become unfair if transparent standards are not consistently applied. Concerns have also been raised about ensuring the system does not become another avenue for multiple taxation.

Whether you agree with the policy or not, one message is becoming increasingly clear.

Nigeria’s tax system is moving towards greater accountability, and businesses that keep proper financial records will be better prepared for the changes ahead.

That’s why staying organised throughout the year is becoming just as important as filing your taxes.

If you’re building a business, freelancing, or earning income independently, now is the right time to start preparing before these reforms become part of everyday tax administration.

Stay ahead of Nigeria’s changing tax landscape with LessaTax.