If the Country Can Print Money, Why Pay Tax? Understanding Nigeria’s New Tax Act, 2025

INTRODUCTION
At first glance, it may seem counterintuitive: if the government has the power to print currency at will, why should citizens be compelled to pay taxes? On the surface, taxation may appear redundant in a system where money creation is theoretically unlimited. However, this perception misunderstands the critical role that taxation plays in economic stability, governance, and the provision of public services.
The Nigeria Tax Act, 2025, recently enacted and effective from January 1, 2026, provides an ideal lens through which to examine this question. This law consolidates and modernizes previous tax legislation, including the Personal Income Tax Act, Companies Income Tax Act, and VAT Act, into a unified framework designed to simplify compliance, broaden the tax base, and enhance revenue collection. Far from being an arbitrary fiscal burden, the act represents a structured approach to maintaining economic balance and funding essential services.

1. Money Printing Alone Does Not Create Wealth
Printing currency is a tool, not a solution. While governments can issue more money, doing so indiscriminately inflates the money supply, reducing the currency’s purchasing power, a phenomenon known as inflation. Historical examples, such as Zimbabwe in the 2000s and more recently Venezuela, illustrate the devastating consequences of excessive money printing: prices skyrocket, savings lose value, and economic stability collapses.
Taxes, in contrast, stabilize the economy by controlling liquidity, ensuring that money retains its value and purchasing power. Without taxation, the government would be forced to print more money to fund operations, creating a cycle of inflation that erodes real wealth.

2. Taxes Fund Real Services
While printing money can create nominal currency, it cannot pay for real-world goods and services. Hospitals, schools, roads, and national security all require tangible resources and human capital. The new tax law ensures that revenue is collected in a structured manner to fund these critical services.
Moreover, taxes enable the government to pay salaries for civil servants, fund defense operations, and maintain infrastructure, functions that printing money alone cannot achieve. In essence, taxation transforms currency into actionable resources that sustain the nation’s institutions and development.

3. A Broadened Tax Base Reduces Inflationary Risk.
Prior to the 2025 reforms, Nigeria had one of the lowest tax-to-GDP ratios in the world, meaning the government collected insufficient revenue relative to the size of the economy. The new Tax Act broadens the tax base by modernizing corporate and personal income taxation, tightening compliance, and consolidating redundant taxes.
By collecting revenue from a wider spectrum of individuals and businesses, the government reduces reliance on printing money or borrowing excessively. This approach helps maintain price stability and prevents inflation from undermining citizens’ purchasing power.

4. Fairer Taxation: Exemptions and Reliefs
Contrary to popular belief, the new tax law does not burden all citizens indiscriminately. Key provisions include:

• Personal Income Tax: Individuals earning less than ₦800,000 annually are exempt from income tax.
• Small Businesses: Companies with annual turnover under ₦50 million are exempt from corporate tax.
• Essential Goods: VAT exemptions or zero-rating on basic food items, healthcare, and education reduce the financial burden on low-income citizens.
These measures ensure that taxation is progressive and equitable, targeting those most able to contribute while safeguarding vulnerable populations.

5. Taxation Maintains Currency Value and Trust
Taxes are not merely about generating revenue; they also confer legitimacy on the currency itself. Citizens must pay obligations in the nation’s money, which reinforces trust in its value. Without taxation, money risks being perceived as “worthless,” akin to monopoly currency.
Thus, taxation serves both an economic and symbolic function: it stabilizes markets while anchoring citizens’ confidence in the currency.

6. Promoting Accountability and Governance
Finally, taxes establish a form of accountability. When citizens contribute financially, there is an expectation that the government will provide essential services and govern responsibly. A well-administered tax system, as envisioned by the 2025 Act, strengthens public institutions, reduces inefficiency, and discourages corruption.
By simplifying administration and consolidating overlapping taxes, the new law seeks to improve transparency and compliance, transforming tax payment from a burdensome obligation into a structured contribution to nation-building.

CONCLUSION
While the government can technically print money, taxation remains indispensable. The Nigeria Tax Act, 2025, clarifies this principle by modernizing the tax system, expanding the tax base, and ensuring fairness. Taxes:
Stabilize the economy and prevent inflation;
Fund essential public services;
Maintain the legitimacy of currency;
Promote accountability and good governance;
Reduce dependence on debt and indiscriminate money printing.
In other words, taxes are not a punitive measure but the backbone of a functional and resilient economy. Understanding this is critical for citizens, businesses, and policymakers alike. In a nation striving for stability and development, taxation is the tool that converts printed money into real, lasting value for society.

IF THE MONIES GENERATED FROM TAXATION IS USED PROPERLY FOR THE BENEFIT OF ALL, IS A QUESTION TO ALSO BE CONSIDERED.