Tax Reforms And The Trust Deficit: Can Nigeria’s New Tax Regime Restore Citizens’ Confidence?

Introduction

Nigeria’s fiscal system has historically been characterised by a paradox. Despite having one of the largest economies in Africa, the country continues to record relatively low tax compliance and a narrow tax base compared with peer jurisdictions. A major factor underlying this challenge is the persistent trust deficit between the Nigerian state and its taxpayers. Many citizens view taxation not as a reciprocal civic obligation but as an imposition by a government perceived to deliver insufficient public value in return.

In recent years, the Federal Government has undertaken an ambitious overhaul of Nigeria’s tax framework following the recommendations of the Presidential Committee on Fiscal Policy and Tax Reforms. The reforms were designed to simplify Nigeria’s tax architecture, reduce the multiplicity of taxes, strengthen revenue administration, and expand the country’s non-oil revenue base. These reforms are being implemented primarily through the institutional framework of the Federal Inland Revenue Service and state-level tax authorities.

While the reforms represent one of the most significant transformations of Nigeria’s fiscal architecture in decades, an important policy question remains unresolved: can structural tax reform alone repair the longstanding trust deficit that undermines voluntary tax compliance in Nigeria?¹

This article argues that although Nigeria’s new tax regime introduces important administrative and legal improvements, the restoration of citizens’ confidence in the tax system will depend not merely on legislative reform but on the strengthening of transparency, accountability, and the fiscal social contract between the government and its citizens.

Nigeria’s Weak Fiscal Social Contract

The relationship between taxation and democratic governance is often described as a fiscal social contract—an implicit understanding that citizens contribute taxes in exchange for public goods, effective governance, and accountability. In jurisdictions where this contract is strong, taxpayers are generally more willing to comply voluntarily with tax obligations.²

Nigeria’s fiscal history, however, has weakened this relationship. For several decades, the country relied heavily on hydrocarbon revenues as the primary source of government income. Because oil revenues flowed directly to the state without requiring significant taxpayer participation, governments were less dependent on citizens for revenue generation. This dynamic diminished incentives for accountability and weakened the participatory dimension of taxation.

Consequently, taxation in Nigeria has often been perceived not as a civic responsibility but as an administrative burden imposed by the state. The perception that tax revenues are frequently mismanaged or diverted through corruption further undermines public confidence. When citizens do not perceive a clear link between taxes paid and public services received, voluntary compliance naturally declines.

This structural challenge has been reflected in Nigeria’s tax-to-GDP ratio, which has historically remained significantly below global and regional averages. The persistence of a large informal economy, widespread tax avoidance, and limited enforcement capacity have further constrained domestic revenue mobilisation.

The Constitutional Basis of Taxing Citizens

The 1999 CFRN ushered in a new era of civilian rule. The 1999 CFRN distributes taxing powers and empowers the various Houses of Assembly to enact laws on taxation that will affect their domain. The National Assembly was vested with powers to legislate for the federation. While that of the States is vested in their respective Houses of Assembly. The National Assembly has the power to legislate to the exclusion of other levels of governments items which include matters of taxation contained in the Exclusive Legislative List. Also they have the power to make laws on any other matter contained in the Concurrent Legislative List any other matters with respect to which it is empowered to make laws in accordance to the constitution.³

The constitution provides in section 24(f) thus;

“It shall be the duty of every citizen to declare his income honestly to appropriate and lawful agencies and pay his tax promptly.”⁴

From the above provisions of that section it can be rightly said that the above provision imposes a constitutional duty to pay tax on the citizens. The provisions of that section is clear whereby the citizens are mandated to declare their incomes with honesty and pay their taxes as and when due.

On this note it can be seen that the view of Tobias,⁵ where he stated :

“ The revenue statutes constitutes penalties imposed by the state which encroach on a citizen’s liberty, that is their right to prosper from free enterprise. Given that there exist no doctrine in the courts to support the notion that there is a duty to contribute to the upkeep of the state through tax and given that there exists a right to avoid but no duty to pay taxes..”

With due respect the view of the above legal scholar cannot hold water in the current constitutional framework because he said that the citizens do not have a duty to pay tax which encourages tax avoidance. However, the constitution creates a duty to pay tax then the view that there is no duty to pay tax is wrong and cannot hold water.

From the foregoing, it can be observed that the constitutional framework for taxation in Nigeria is not hinged on a fiscal social contract but on a one-sided governmental imposition of taxes and levies which the citizens have no choice but to obey.

Architecture of Nigeria’s Recent Tax Reforms

Recognising the limitations of the existing tax framework, the Federal Government initiated a comprehensive reform programme designed to modernise Nigeria’s fiscal system and improve revenue performance. The reform agenda was driven by the Presidential Committee on Fiscal Policy and Tax Reforms, which was tasked with reviewing Nigeria’s fiscal policies and recommending structural improvements.

The reform programme seeks to address several longstanding weaknesses in Nigeria’s tax system. These include the multiplicity of taxes across federal, state, and local governments, the complexity of tax compliance procedures, and inefficiencies within tax administration.

One of the central goals of the reform initiative is the harmonisation and simplification of Nigeria’s tax framework. By streamlining tax laws and reducing overlapping levies, the reforms aim to lower compliance costs for businesses and improve predictability within the fiscal environment.

Another key component of the reform strategy is the modernisation of tax administration through digitalisation. The adoption of electronic filing systems, integrated taxpayer databases, and digital payment platforms is expected to improve efficiency, reduce administrative discretion, and limit opportunities for corruption.

The reforms also aim to expand the tax base by improving compliance mechanisms and incorporating previously under-taxed sectors of the economy, including digital services and emerging financial technologies. These reforms culminated mainly in the enactment of the Nigeria Tax Act⁶ and the Nigeria Tax Administration Act⁷ coupled with two other Tax laws.

Trust as the Missing Element in Tax Reform

Although the structural reforms represent an important step toward strengthening Nigeria’s fiscal capacity, the success of the new tax regime ultimately depends on the perceived legitimacy of the tax system.

Empirical studies in tax policy consistently demonstrate that voluntary compliance is strongly influenced by taxpayer perceptions of fairness, transparency, and institutional integrity. Where taxpayers believe that the system is equitable and that revenues are utilised responsibly, compliance levels tend to increase even in the absence of aggressive enforcement.⁸

Conversely, enforcement-driven approaches to taxation can sometimes deepen public distrust if citizens perceive them as coercive or discriminatory. In Nigeria, past experiences with aggressive tax enforcement—particularly at subnational levels—have sometimes reinforced the perception that taxation is primarily extractive rather than developmental.⁹

For this reason, the effectiveness of Nigeria’s recent reforms will depend not only on improved tax administration but also on rebuilding the legitimacy of the fiscal system in the eyes of taxpayers.

Strengthening Transparency and Fiscal Accountability

One of the most critical steps toward rebuilding trust in Nigeria’s tax system is improving transparency in the management of public finances. Taxpayers are more likely to comply when they can clearly see how their contributions are being utilised.

Government institutions must therefore prioritise the publication of accessible and comprehensible fiscal information, including detailed budget reports, tax expenditure disclosures, and project implementation updates. Transparent reporting mechanisms can help demonstrate the link between tax revenue and public investment.

Equally important is the strengthening of oversight institutions responsible for monitoring public expenditure. Effective legislative scrutiny, independent audit processes, and robust anti-corruption enforcement can help reassure taxpayers that public funds are being managed responsibly.¹⁰

The credibility of any tax system is ultimately judged by its ability to translate revenue into tangible public benefits. Citizens are significantly more willing to comply with tax obligations when they observe visible improvements in infrastructure, public health, education, and security.

In Nigeria, the perception that tax revenues do not translate into meaningful improvements in daily life remains a major obstacle to voluntary compliance. Governments must therefore prioritise projects that deliver visible and measurable improvements in public welfare. Even modest but well-communicated improvements in public services can contribute significantly to rebuilding trust in the fiscal system.

A Taxpayer-Centric Administrative Culture

Another critical dimension of trust-building lies in the relationship between tax authorities and taxpayers. Historically, interactions between taxpayers and tax officials in Nigeria have sometimes been characterised by bureaucratic complexity and adversarial enforcement.

Modern tax administration increasingly emphasises taxpayer-centric service delivery, where tax authorities function not only as enforcement agencies but also as service providers. Simplified compliance procedures, responsive taxpayer support systems, and fair dispute resolution mechanisms can improve the overall perception of the tax system.

Digital platforms that enable efficient filing, payment, and communication with tax authorities can further enhance taxpayer confidence by reducing administrative friction.

Ultimately, rebuilding trust in Nigeria’s tax system requires the gradual reconstruction of the fiscal social contract between the state and its citizens. This process extends beyond the technical design of tax laws and requires broader improvements in governance, public accountability, and democratic participation.¹¹

Citizens must increasingly perceive taxation not merely as a legal obligation but as a contribution toward collective national development. Achieving this shift in perception requires consistent demonstration that tax revenues are utilised in ways that improve societal welfare. If Nigeria’s tax reforms are accompanied by meaningful improvements in governance and public service delivery, the country may gradually strengthen the legitimacy of its fiscal institutions.

Conclusion

Nigeria’s recent tax reforms represent an important milestone in the country’s efforts to modernise its fiscal framework and strengthen domestic revenue mobilisation. By simplifying tax laws, improving administrative efficiency, and expanding the tax base, the reforms address several structural challenges that have historically constrained revenue collection.

However, the deeper challenge facing Nigeria’s tax system lies in the longstanding trust deficit between the government and its citizens. Legislative reform alone cannot resolve this problem. Sustainable tax compliance ultimately depends on public confidence in the fairness, transparency, and effectiveness of government institutions.

The long-term success of Nigeria’s new tax regime will therefore depend not only on efficient tax administration but also on the broader project of rebuilding trust in public governance. If implemented alongside stronger transparency, improved service delivery, and meaningful accountability mechanisms, the reforms may provide an opportunity to redefine the fiscal relationship between the Nigerian state and its citizens.

Footnotes

1. Punch Newspaper, ‘Trust Deficit Fuels Resistance to New Tax Laws - Sanwo-Olu, Olanipekun’ (28^th January, 2026) available at https://punchng.com/trust-deficit-fuels-resistance-to-new-tax-laws-sanwo-olu-olanipekun/

2. R. Murphy, Joy of Tax,(Bantam Press London 2015)

3. 2^nd Schedule of CFRN

4. 1999 CFRN as Amended

5. T. Lonquist, The Trend Towards Purposive Statutory Interpretation: Human Rights at Stake, Revenue Law Journal, vol 13: Iss1, Article3, available at http/ epublications.bond.edu.au/rlj/vol13/Iss1/3

6. The NTA 2025.

7. The NTAA 2025

8. R. Murphy, Joy of Tax,(Bantam Press London 2015)

9. Ibid.

10. V. Asri, et al, ‘Trust in tax administration: Why it mattes for tax compliance.’ (2025) CMI Policy Brief. Chr. Michelsen Institute

11. AA Adekoya et. al., ‘Trust Relationship and Tax Compliance in Developing Countries - Informal Sector Perspectives’ (2022) International Journal of Economics, Commerce and Management UK.

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