Nigeria and Zimbabwe have introduced presumptive tax measures aimed at expanding their tax bases and capturing revenue from segments of the economy that traditionally fall outside formal tax administration.

Experts describe presumptive taxation as a simplified tax assessment method for small businesses and professionals with limited bookkeeping capacity, where taxable income is estimated based on turnover or indicators, rather than actual, audited profits.

In Nigeria, the Federal Government recently rolled out a one percent presumptive tax on the turnover of eligible informal sector businesses, while Zimbabwe has introduced a 15 percent presumptive tax on gross rental income earned by landlords leasing property to business tenants.

Although both measures fall under the broader concept of presumptive taxation—where tax authorities estimate tax obligations using simplified formulas rather than detailed income declarations—their design and target groups differ significantly.

Nigeria’s approach: formalising the informal sector

Nigeria’s policy focuses on bringing the vast informal economy into the tax net without imposing heavy financial burdens on small operators.

The regulation, signed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, imposes a flat one percent levy on the turnover of qualifying informal businesses.

Government officials say the measure is part of a broader tax reform framework introduced after new tax laws came into effect between mid-2025 and January 2026.

A key objective is to formalise millions of micro and small enterprises that operate outside the tax system while also improving transparency and reducing arbitrary tax assessments.

Under the policy, micro and subsistence-level businesses are exempted, protecting the most vulnerable operators from tax liabilities.

Authorities have also banned the use of roadblocks and cash-based collections by tax officials, practices that have historically been associated with harassment and unofficial levies.

Instead, the government plans to rely on digital tax identification platforms to register businesses and track compliance.

Officials say the simplified tax rate is designed to encourage voluntary compliance and broaden the tax base rather than increase the tax burden.

Nigeria’s informal sector is widely believed to account for a large share of employment and economic activity but contributes only marginally to government revenue.

By formalising this segment, policymakers hope to improve fiscal capacity while supporting the country’s broader economic ambitions, including plans to build a $1 trillion economy by 2030.

Zimbabwe’s model: taxing rental income

Zimbabwe’s presumptive tax policy takes a different route, targeting rental income generated from commercial property leases.

The Zimbabwe Revenue Authority (ZIMRA) introduced a 15 per cent presumptive tax on gross rental income beginning January 1, 2026, under the country’s Finance Act 2025.

Unlike Nigeria’s turnover-based levy for small businesses, Zimbabwe’s tax applies specifically to landlords, property owners, lessors, and sub-lessors who earn rent from business tenants.

The tax is calculated on gross rental income and treated as a final tax, meaning landlords cannot deduct expenses or claim credits.

Compliance is enforced through a withholding mechanism, where tenants deduct the tax and remit it directly to ZIMRA on behalf of the landlord.

The law also requires property owners leasing premises for business purposes to register with the tax authority, while estate agents and intermediaries must ensure the tax is paid before disbursing rental income.

Tax returns must be filed by the fifth day of the following month, with payments due by the 10th day, and non-compliance could attract penalties of up to 100 per cent of the unpaid tax.

Shared goal, different strategies

Despite differences in scope and structure, both policies reflect a common objective among African governments: capturing revenue from sectors that are often difficult to tax through traditional income tax systems.

Nigeria’s model emphasises broadening participation across the informal economy through a low, simplified rate and stronger digital monitoring.

Zimbabwe’s system, by contrast, focuses on ensuring compliance in the rental property market, using withholding obligations and strict penalties to secure revenue.

Economists note that presumptive taxes can help governments improve tax compliance and administrative efficiency, especially in economies where large portions of economic activity occur outside formal accounting systems.

However, their effectiveness often depends on clear implementation, strong enforcement mechanisms, and public acceptance, factors that both countries will need to manage carefully as the policies take effect.

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