Nigeria’s proposed tax reform bills mark a significant shift in the country’s fiscal policy, aiming to modernise the tax system, enhance revenue generation, and promote fiscal equity. These reforms introduce progressive tax rates, a derivation-based VAT distribution system, and measures to regulate the growing digital economy. While the reforms have the potential to stimulate economic growth, they also present substantial risks to tax compliance, which could hinder their successful implementation. These risks, particularly from an auditor’s perspective, include challenges in navigating complex tax provisions, preventing tax evasion, and ensuring accurate VAT allocation.
This paper evaluates these compliance risks by examining the perspective of auditors responsible for overseeing the reforms. The aim of the study is to explore the challenges auditors face in implementing the new tax framework, identify key compliance risks, and propose strategies to mitigate these risks. A qualitative research methodology is adopted, involving in-depth interviews with tax professionals, auditors, and representatives from regulatory bodies, along with a comprehensive review of relevant policy documents and academic literature. The analysis focuses on key obstacles such as resource limitations, technological constraints, and resistance from taxpayers, particularly in the digital economy.
The findings highlight that, despite the considerable challenges auditors face — including the complexity of the new provisions and limited capacity for digital auditing — there are opportunities to improve compliance through the integration of advanced technologies, capacity building, and enhanced collaboration between auditors, tax authorities, and businesses. The paper concludes with several recommendations, including the adoption of data analytics tools, continuous professional development for auditors, simplification of tax laws, and stronger public-private partnerships. Addressing these issues is crucial for ensuring the success of Nigeria’s tax reforms and establishing a transparent, efficient, and equitable tax system that supports national development.