Understanding the Impact of Tax Reforms on Private Schools.pdf

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1. Mr. Raji Suleiman 08036047288

2. Understanding the Impact of Tax Reforms on Private
School Operations: Insights from Nigeria’s Recent Tax
Laws
Abstract
This paper examines how recent tax reforms in Nigeria are affecting the operations, sustainability, and viability
of private schools. It analyses legislative changes (especially the Nigeria Tax Act, tax bills, and state‐level tax
increases), the direct and indirect costs imposed on school proprietors, and the broader implications for access to
education, employment, and quality. The paper concludes with policy recommendations to ensure tax policy
supports, rather than undermines, private education.

3. Outline:
➢Introduction
➢Recent Tax Reforms in Nigeria
➢Operational Impact on Private Schools
➢Boader Implications
➢Case Studies/Examples
➢Analysis & Discussion
➢Policy Recommendations
➢Conclusion

5. Introduction
•Private schools play a critical role in Nigeria's education sector. They provide access to
education where public schools may be inadequate, often cater to different
socio‐economic strata, and contribute significantly to employment and education quality.
However, the financial sustainability of private schools is closely tied to the regulatory,
fiscal and tax environment in which they operate. When tax laws or levies are changed,
private schools may face increased costs, unpredictable obligations, and potential threats
to viability or quality.
•In recent years, Nigeria has introduced significant tax reforms—both at the federal and
state levels—that affect private school operations. These include proposed changes in
federal tax laws (via the Nigeria Tax Act, related revenue and administration bills), as
well as novel or increased levies and assessment practices at sub‐national levels (states
and the Federal Capital Territory, FCT). This paper examines how these reforms are
affecting private schools, the risks to access and quality, and policy recommendations for
balancing revenue needs with educational sustainability.

6. Recent Tax Reforms in Nigeria Affecting Private Schools
Federal Level Reforms
➢New Tax Bills & Nigeria Tax Act
The federal government under President Bola Tinubu proposed and
passed several bills intended to overhaul Nigeria’s tax system: the
Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue
Service Establishment Bill, and the Joint Revenue Board
(Establishment) Bill. Reuters+2interceptng.com+2
➢Development Levy Proposal & Education Tax Changes
One proposal is to eliminate certain existing education‐related taxes
and replace them with a development levy (e.g. a percentage on
assessable profits for companies). There is concern about how this
will affect entities involved in education (public and private),
including implications for TETFund (Tertiary Education Trust Fund).
interceptng.com+2Punch+2

7. Recent Tax Reforms in Nigeria Affecting Private Schools (Continue)
Federal Level Reforms
➢Concern about TETFund
The Academic Staff Union of Universities (ASUU) has expressed
opposition to parts of the tax reform bills which they argue might
reduce the scope, funding, or legal basis of TETFund. They argue
that any modification that undermines TETFund could harm
education infrastructure and quality. interceptng.com+2Independent
Newspaper Nigeria+2
➢Revenue Mobilization & Harmonization
The general purpose of the reforms is to increase tax‐to‐GDP ratio
(currently relatively low), reduce leakages, simplify multiplicity of
taxes and levies, better distribute revenue among federal, state and
local governments, and improve compliance.
Punch+3Reuters+3Reuters+3

8. State and FCT Level Tax/Levy Changes
Several states and the FCT have introduced or attempted to
introduce new taxes, assessments, or levies on private schools
which either increase burdens or change how tax/levy is
calculated:
➢FCT (Federal Capital Territory): 5% Tax on Private
Schools
In 2024, the FCT Education Secretariat (Department of
Quality Assurance) proposed a 5% annual tax on private
schools, calculated based on tuition fees and student
enrolment. Private school proprietors warned this would
endanger many schools’ viability. Nairametrics+2Vanguard
News+2
➢Edo State: Personal Income Tax Increase
Edo State Internal Revenue Service (EIRS) has assessed
private school owners with very large tax increases—reports
of over 300% or more increments in personal income tax
obligations. Proprietors argue that the tax base has been
shifted (e.g. using minimum fee per student times enrollment)
without regard for actual profits or costs. Daily Post+1

9. State and FCT Level Tax/Levy Changes
(Continued)
➢Enugu State: Licensing, Approval & Education Tax Charges
Enugu State issued new schedules for licensing, provisional/renewal
approvals, and once‐off or annual fees. The government clarified that
schools would pay between ₦100,000 and ₦300,000 depending on
category (primary, secondary, combined) for school‐license, and
rejected reports of ₦1‐5 million mandates as misinformation.
However, there are reports that schools are facing effective costs far
higher via multiple fees and charges. Also, some schools have
reportedly raised tuition fees by up to 50% in response.
thefact.ng+3NewsWire NG+3edugist.org+3
➢Allegations of Multiple Taxes, Levies
In various states, private schools and their associations have alleged
that besides statutory taxes, schools face “multiple levies” (signage,
environmental health, local government charges, safety permits etc.)
that cumulatively increase cost and unpredictability. For example, in
Kwara State, there have been claims of multiple levies being imposed,
although the state government asserts no new taxes have been
introduced. TheCable

10. Impact on Private School Operations
Based on the reforms and evidence, the following operational impacts are
emerging (or are highly likely), both immediate and medium‐term.
➢Increased Cost Burdens
New or increased taxes / levies increase the fixed and recurring costs for
schools. For example, licensing, renewal, inspection, registration fees—
plus personal income taxes or business‐type levies—add to overhead
costs. The FCT 5% tax (based on fee and enrollment) is one such major
incremental cost. Nairametrics+1
➢Fee Hikes & Affordability Pressure
School proprietors are responding by increasing tuition and other fees. In
Enugu, some schools reportedly increased fees by about 35‐50% in
reaction to perceived or actual taxation/levy burdens. Such increases may
reduce affordability for lower‐ and middle‐income families. Sahara
Reporters
➢Cash Flow & Profitability Challenges
Many private schools operate on tight margins. Sudden hikes in
non‐discretionary charges (taxes, levies, fixed costs) without matching
increases in revenue (tuition, enrolment) can strain cash flows. Schools
with lower enrolment, or those in poorer areas, are more vulnerable.

11. Impact on Private School Operations
(Continued)
➢Quality Tradeoffs
To manage higher cost burdens, schools may reduce quality: fewer or
less‐qualified teachers, cutting non‐essential services, delaying maintenance,
reducing instructional materials. Over time, this threatens learning outcomes.
➢Employment and Related Economic Effects
Teachers and staff may lose jobs if schools cut back. Ancillary services (vendors,
maintenance, transport) associated with schools may also suffer. Given private
schools are significant employers in many states, this has broader economic
implications. For instance, in Edo State, private school owners warned that tax
hikes would lead to job losses among thousands of teachers. The Sun
➢Risk of Schools Closing or Relocating
For small schools, especially those charging low fees or operating in areas with
weak purchasing power, increased taxes could force them to close or reduce
operations. This raises risks of reduced school availability in underserved areas.
➢Uncertainty & Administrative Costs
Many of the changes are either under proposal, ambiguous, disputed, or subject to
conflicting reports. Proprietors must spend time on compliance, often navigating
conflicting demands by state and local government bodies. This unpredictability
is itself a cost (legal, administrative, time, risk).

12. Broader Implication
➢Access and Equity
If tuition increases, some students may be excluded. Families of low or middle income
may be unable to bear the cost, possibly increasing out‐of‐school rates. Geographic
equity may suffer: rural and peri‐urban schools may be hit harder.
➢Quality of Learning
Declines in quality caused by cost cutting can weaken reputation, reduce student
performance, or reduce standards.
➢Sector Growth and Investment
Investors or entrepreneurs might become wary of entering the private school business
if fiscal burdens are unpredictable or heavy. This could reduce expansion, innovation,
or specialization.
➢Public Policy Trust and Compliance
When tax/levy practices are perceived as arbitrary (e.g. setting of minimum fee
benchmarks, using headcount × benchmark rate instead of profit or income), there may
be resistance, non‐compliance, and distrust toward government. This can undermine
tax morale.
➢Interplay with Federal Reforms
Federal tax reforms (e.g. the development levy, adjustments in education tax) may
shift some school operational costs or tax burdens. If federal laws reduce certain taxes
but state governments increase others, total burden could still climb or become more
complicated.

13. Challenges & Unresolved Issues
•Data gaps: Many of the proposed reforms or state‐level charges are
underreported; empirical data on costs, enrolment shifts, etc., is
limited.
•Legal ambiguity: Some states announce charges that proprietors say
are not lawful, or that use executes before legislation passes, or that
state agencies differ in interpretation. For example, in Edo State some
reports claim a new tax has not been lawfully passed by the state
assembly. Nigerian Observer
•Elasticity of demand: It is unclear how many parents will absorb fee
hikes vs withdrawing children; what the tipping point is that leads to
enrollment loss.
•Timing and phasing: Sudden enforcement without transition periods
increases risk to school operations.
•Coordination between federal, state, local government agencies is
weak, leading to overlapping charges.

14. Value added tax sharing formula
•30% stays in the state where it’s generated/Consumption
•50% is shared equally among states
•20% is allocated based on population

15. Policy Recommendations
To ensure education remains accessible, and private schools remain viable, while also
recognizing government needs to raise revenue, the following policy recommendations are
offered:
➢Clarity, Legitimacy & Transparency
oAll tax/levy changes affecting private schools should be legislated (state assembly, local
government council) and clearly communicated.
oAssessment bases should be transparent, e.g. whether based on profits, revenue,
enrollment, or other benchmarks. Arbitrary benchmarks should be avoided
➢ Fair Base & Progressive Treatment
oTaxes on private schools should consider ability to pay: low‐fee schools vs premium
schools; schools in poor/urban vs affluent areas.
oWhere possible, use profit‐based or margin‐based taxation rather than flat benchmarks
per student that ignore cost structures.
➢Exemptions or Reliefs for Vulnerable Schools
oProvide tax holidays or reduced rates for new schools, rural schools, or low‐fee schools.
oConsider sliding scale fees for licensing / renewal / approval based on school size,
enrolment, or fee levels.
➢Phased & Predictable Implementation
oImplement changes over time, allowing schools to plan and adjust (e.g. over academic
year).
oGive reasonable notice before enforcement, and allow for consultations with school
proprietor associations.

16. Policy Recommendations (continue)
➢Harmonization & Rationalization of Levies
oReduce the number of separate levies, fees, approvals from multiple agencies where
possible.
oHarmonize federal, state, local demands to avoid duplication. Streamline licensing,
approval, renewal to avoid redundant inspections or overlapping charges.
➢Supportive Measures from Government
oSubsidies, grants, or in‐kind support (e.g. provision of learning materials,
infrastructure) to ease burden on schools.
oCapacity building: supporting financial management, cost control in private schools.
➢Monitoring & Evaluation
oGovernment and education stakeholders should collect and publish data on how
reforms affect enrolment, staff, quality, finances of private schools.
oUse surveys of parents, schools to capture responses—where do schools cut back?
What is the enrollment elasticity?
➢Stakeholder Engagement
oInvolve private school associations (NAPPS and others) when designing tax/levy
changes so that practical concerns are considered.
oPublic consultations, hearings, or impact assessments should be mandatory.

17. Conclusion
Tax reforms are a necessary part of public policy, especially when
governments need to increase revenue, harmonize tax systems,
and improve transparency. However, for private schools in
Nigeria, recent federal and state‐level changes pose real risks to
affordability, access, and quality of education. The evidence
suggests that abrupt or poorly designed tax/levy reforms can force
fee hikes, lower service quality, reduce employment, or even lead
to school closures, especially among low‐fee private schools or
those in less affluent areas.
Balancing the need for revenue with the public good of education
requires careful policy design: transparent, phased, fair, and
responsive to the capacities of different categories of schools.
Ensuring educational access and quality while also meeting fiscal
goals is a difficult but essential policy challenge.

18. QUESTIONS

19. Mr. Raji Suleiman