The Federal Inland Revenue Service has clarified that the controversial 4% Development Levy introduced under Nigeria’s new tax reforms is not a new tax, but a consolidation of multiple existing charges aimed at simplifying compliance and improving economic competitiveness.
The Federal Inland Revenue Service has moved to calm public concerns over the newly enacted Nigeria Tax Act and Nigeria Tax Administration Act, insisting that the 4% Development Levy being widely debated is not an additional burden on businesses.
In a statement issued on Tuesday, the agency said the levy merely merges several pre-existing payments—including the Tertiary Education Tax, NITDA Levy, NASENI Levy and Police Trust Fund Levy—into a single, predictable charge. According to the FIRS, this consolidation eliminates multiple agency-level collections, reduces compliance costs, and offers clearer fiscal planning for businesses.
The tax agency said the reform is part of a broader strategy to make Nigeria’s business environment more competitive, while providing long-term fiscal stability and restoring investor confidence.
It added that small businesses and non-resident companies remain exempt, ensuring that vulnerable enterprises are not exposed to additional financial pressure.
Tax analysts say the 4% levy reflects a global push for clearer and more coordinated tax structures. “The consolidation sends a signal to investors that Nigeria is moving away from fragmented, unpredictable levies and toward a modern tax regime,” a Lagos-based analyst told our correspondent.
Amid speculation that the government was rolling back Free Trade Zone incentives, the FIRS clarified that FTZs retain their tax-exempt status. Under the new law, FTZ companies may sell up to 25% of their goods locally without losing incentives, and have been granted a three-year transition period to adjust to the new rules.
On the newly introduced 15% minimum Effective Tax Rate for large domestic and multinational firms, the agency said the move aligns Nigeria with a global tax agreement endorsed by more than 140 countries under the OECD/G20 tax framework. Without adopting the rule, the FIRS warned, Nigeria risked losing substantial revenue to “Top-Up Tax” collections abroad.
The reforms also overhaul capital gains taxation—now termed “chargeable gains”—introducing incentives such as reinvestment relief for investors who redirect proceeds into Nigerian companies within the same year. Experts say this single provision could unlock new capital for startups, private equity, and emerging industries.
The FIRS maintained that the tax reforms were designed to strengthen fiscal stability, deepen investor confidence and ensure a more predictable environment for businesses.
