When a small construction contractor in Ughelli secures a contract to renovate a public school, the excitement could quickly turn into trouble if his business is not registered for tax. Under Nigeria’s new Tax Administration Act, the government agency or company that awarded him the job could be forced to pay a ₦5 million penalty simply for working with an unregistered contractor.
The law, designed to block tax evasion, now places responsibility on both sides of a contract. Any statutory body or private company that awards contracts to individuals or businesses without valid tax registration will face a heavy fine, regardless of the contract’s size.
For the contractor himself, the cost of non-compliance also adds up fast. If he fails to register for tax, he will be fined ₦50,000 in the first month and ₦25,000 for every additional month the default continues—penalties that can quietly drain a small business already struggling with rising costs.
The impact goes beyond contractors. A freelance graphic designer in Asaba who ignores filing annual tax returns or submits incomplete information could be required to pay ₦100,000 in the first month of default and ₦50,000 for each additional month the failure continues, even if the income earned was modest.
Digital compliance is another area where many small businesses may be caught off guard. For example, a retail shop owner who refuses to allow tax authorities to install approved tax technology after 30 days’ notice will face a ₦1 million fine on the first day, plus ₦10,000 for every extra day of refusal.
Similarly, a restaurant or supermarket that processes sales but fails to use the government-approved fiscalisation system could be hit with a ₦200,000 penalty, in addition to paying 100 per cent of the tax due and interest calculated at the prevailing Central Bank of Nigeria Monetary Policy Rate.
The law also affects employers and business owners who handle taxes on behalf of others. For instance, a company that deducts tax from staff salaries but fails to remit it will be fined 40 per cent of the amount not deducted or withheld, turning what might seem like a small oversight into a major financial setback.
Even reporting obligations are enforced. A business owner required to make tax attribution but who fails to notify the relevant tax authority after doing so risks a ₦1 million penalty, according to the Act.
Beyond financial sanctions, the NTAA carries serious personal consequences. Anyone convicted of offences under the law could face up to three years in prison, or be ordered to pay a fine not less than the principal tax owed, plus an additional penalty of up to 50 per cent of that amount, or both.
For everyday Nigerians—contractors, freelancers, shop owners, and employers—the message of the new law is clear: tax compliance is no longer abstract policy. It now directly affects who gets contracts, how businesses survive, and the personal freedom of those who choose to ignore the rules.
