Nineteen Nigerian states have domesticated the Model Taxes and Levies Act, moving the country closer to a unified tax administration framework designed to eliminate multiple taxation across the federation.
The move is part of a broader federal effort to implement a “nine-head framework” for tax harmonisation, which aims to streamline the myriad of levies and taxes collected by state and local governments.
The Federal Government is coordinating the process to ensure that businesses operating across different states do not face overlapping or contradictory tax demands, which have historically increased the cost of doing business in Nigeria.
By domesticating the model act, these states are aligning their local tax laws with a standardised template. This alignment is intended to create a more predictable fiscal environment for investors and small and medium enterprises.
The Federal Inland Revenue Service and the Ministry of Finance have been central to the development of this model, seeking to balance the need for state revenue with the necessity of economic growth.
For years, Nigerian businesses have complained about a “tax jungle” where state internal revenue services and local government councils levy similar charges on the same commercial activity. This fragmented approach often leads to disputes, legal battles, and a general decline in formal business registration.
Reducing the Burden of Multiple Taxation
The nine-head framework seeks to categorise and consolidate taxes into a manageable structure, removing redundant levies that overlap with federal or other state taxes.
This restructuring follows recommendations from the Presidential Committee on Fiscal Policy and Tax Reforms, which identified the excessive number of taxes in Nigeria as a primary deterrent to foreign direct investment.
The committee has previously argued that a simplified tax regime with lower rates and broader bases would actually increase total revenue by improving compliance and reducing the cost of collection.
Under the new arrangement, states are encouraged to move away from aggressive, ad-hoc levy creation toward a more sustainable system based on the Model Taxes and Levies Act.
The domestication process requires state houses of assembly to pass legislation that incorporates the model act’s provisions into state law. This legal transition ensures that the harmonised taxes are enforceable and transparent.
Financial analysts suggest that the success of this initiative depends on the willingness of state governments to forgo short-term gains from arbitrary levies in exchange for long-term economic expansion.
The Federal Ministry of Finance has indicated that the goal is to eventually have all 36 states adopt the framework to create a truly seamless national market.
The impact is expected to be most visible for logistics companies, manufacturers, and retail chains that move goods across state lines and are frequently subjected to multiple permits and levies at state borders.
The Federal Government will continue to monitor the implementation of the act within the nineteen states to ensure that the spirit of the harmonisation is maintained and not merely rebranded as new forms of taxation.
The next phase of the rollout involves engaging the remaining states to adopt the model act and establishing a joint monitoring mechanism to track the reduction of multiple taxation in real-time.
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