The Chairman of the Alliance for Economic Research and Ethics (AERE), Dele Kelvin Oye, has said the rent relief which caps deductible rental expenses at N500,000 per year and the restrictions on forex deductions, preventing businesses from deducting actual foreign exchange losses when sourcing funds in Nigeria’s volatile currency market are amongst hurdles that could hinder the successful implementation of the Nigeria Tax Act 2025.

According to him, while the reform is the most significant legislative change to the Nigerian income tax environment since the return to democracy, there are structural ‘glitches’ that demonstrate a disconnect from Nigerian reality.

Oye, who is the immediate Past Chairman of the Organised Private Sector of Nigeria(OPSN) and Chairman of the Nigeria-Türkiye Business Council (NTBC), spoke in a paper titled, “The Nigeria Tax Act 2025: A Critical Examination Of Consolidation, Implementation Challenges, And Institutional Identity Crisis.”

He said: “Perhaps the most criticized clause in the new Act is the limit on relief for individual taxpayers. The Act decrees that taxpayers will be allowed to deduct rental expenses capped at NGN 500,000 per annum. Considering Nigeria’s primary economic hubs, including Lagos, Abuja and Port Harcourt, this figure is embarrassingly low.

Given the inflationary and devaluationary pressures on property values, NGN 500,000 per annum is a drop in the bucket versus the actual rent expense of most average urban professionals and small business owners. “The “Rent Relief Paradox” is emblematic of a failure to properly index tax benefits to inflationary realities.

By establishing fixed, static, and extremely low thresholds, the government progresses towards a “decorative doormat” as opposed to a safety net. For many taxpayers, the time and effort needed to collect documentation and submit for relief expenses may outweigh the aggregate tax savings.

“In fact, the policy may simply be emblematic of the purpose in theory, as it allocates benefits to persons above the threshold because it available to them, while providing no tangible benefit in the real world.

Rent Relief, like other costs, would actually better serve the purpose in a meaningfully inflationary environment if tied to something regional like averages or a minimum wage.”

On the forex fiasco, Oye said: “Section 20(4) of the NTA 2025 creates incredible administrative burdens on businesses in Nigeria’s perpetual volatile forex market.

Credit: newtelegraphng.com