- Proposed global tax reforms could redirect an estimated $2.5 billion in annual corporate tax to Nigeria by taxing multinational profits where real economic activity takes place
Nigeria’s Multinationals Could Face a New Tax Reality as UN Pushes. Nigeria could emerge as one of the significant beneficiaries of a proposed overhaul of the international corporate tax system, with new modelling suggesting that the country could potentially collect an additional $2.5 billion in corporate tax each year if multinational profits were allocated according to where businesses genuinely operate.
The estimate, highlighted by the Tax Justice Network (TJN), comes as countries negotiate a new United Nations Framework Convention on International Tax Cooperation.
At the centre of the proposed reform is a fundamental question: Should multinational companies pay tax where they declare their profits, or where they actually make their money?
The emerging UN approach favours the latter.
Known as “pay-where-you-play,” the proposed model would seek to allocate a multinational group’s profits among countries according to where its economic activity takes place, including where it employs people, creates value, sells goods and services, and generates revenue.
The change could have particular significance for developing economies such as Nigeria, where multinational businesses can generate substantial economic value without necessarily recording the corresponding share of group profits locally.
From “Where You Say” to “Where You Play”
For roughly a century, international corporate taxation has largely been built around the principle that different entities within a multinational group should be treated as separate businesses dealing with each other on an arm’s-length basis.
Critics argue that the system has become increasingly difficult to apply effectively to modern multinational enterprises whose operations, intellectual property, financing and digital activities can span dozens of jurisdictions.
The Tax Justice Network describes the traditional model as “pay-where-you-say” taxation because multinational groups can potentially report profits in jurisdictions where they have limited real economic activity.
The proposed alternative would treat a multinational group more like a single economic enterprise for profit-allocation purposes.
Instead of asking only where a particular subsidiary booked its profit, the system would consider where the multinational’s underlying business activity actually occurs.
For example, where a multinational has a substantial workforce and customer base in Nigeria but records a large proportion of its group profits elsewhere, Nigeria could potentially receive a greater share of the taxable profit under a unitary taxation approach.
The Tax Justice Network argues that this would make profit shifting into low-tax jurisdictions significantly less effective because the location where profits are recorded would become less important than the location of genuine economic activity.
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What Could It Mean for Nigeria?
The potential Nigerian figure is striking.
According to Tax Justice Network modelling cited in recent reporting, Nigeria could gain approximately $2.5 billion in additional annual corporate tax revenue, representing an estimated 641% increase in the corporate tax collected from multinational companies under the model.
The estimate places Nigeria among the countries that could experience some of the largest proportional gains from a fundamental redistribution of multinational taxing rights.
Other African economies could also benefit substantially.
The modelling estimates potential additional annual corporate tax revenue of approximately:
- South Africa – $8.9 billion
- Kenya – $1.3 billion
- Nigeria – $2.5 billion
The broader finding is that lower-income economies could experience much larger percentage increases than wealthier jurisdictions because multinational profits are currently concentrated disproportionately in certain high-income and tax-favoured jurisdictions.
It is important, however, to stress that these figures represent modelled potential revenue under a proposed global tax framework. They should not be interpreted as amounts Nigeria or other countries are already guaranteed to collect.
Why Developing Countries Stand to Gain
The proposed reform is particularly relevant to developing economies because many multinational businesses serve large consumer markets and operate extensive local supply chains without necessarily reporting the same proportion of global profits in those markets.
Under a system based more heavily on economic presence, factors such as:
- Employees and payroll;
- Sales and customers;
- Physical assets;
- Production;
- Local value creation; and
- Other measures of economic activity
could play a greater role in determining where multinational profits are taxed.
The result could be a redistribution of taxing rights away from jurisdictions that specialise in attracting reported profits and towards countries where businesses have substantial operational footprints.
Tax Justice Network’s analysis suggests that developing countries collectively could see particularly significant gains from such a shift.
Nigeria Has Already Been Moving Towards Source-Based Taxation
For Nigeria, the proposed international shift would not represent a completely unfamiliar direction.
Nigeria has already developed rules designed to bring certain income earned by non-resident businesses within the Nigerian tax net.
The Nigeria Tax Act 2025, which took effect from 1 January 2026, provides that income and profits derived by non-resident persons from Nigeria may be subject to Nigerian taxation. It also recognises taxable presence through concepts including permanent establishment and significant economic presence.
The legislation therefore reflects a broader move towards taxing economic activity connected to Nigeria rather than relying exclusively on traditional physical-presence concepts.
Recent analysis of the new Nigerian tax regime has also highlighted expanded nexus rules affecting non-resident businesses, particularly in the digital economy.
This makes the international negotiations particularly relevant to Nigeria: the country’s domestic reforms are increasingly intersecting with a global debate about who should have the right to tax multinational profits.
The Digital Economy Makes the Question More Urgent
The debate becomes even more complicated when multinational businesses can generate significant revenue from Nigerian consumers without maintaining a traditional physical presence in the country.
Digital platforms, online advertising, cloud services, streaming businesses and other technology-driven models can reach millions of Nigerian users while their headquarters, intellectual property and other corporate functions may be located elsewhere.
Traditional international tax rules were developed for a very different economic environment.
The UN’s current negotiations explicitly recognise the need to modernise international taxation, including through discussions on cross-border services and the allocation of taxing rights. The UN has said that the negotiations are intended to address weaknesses in existing international tax rules and improve the ability of developing countries to mobilise domestic resources.
The UN Negotiations Enter a Critical Stage
The proposed changes are not yet law.
Countries are currently negotiating the United Nations Framework Convention on International Tax Cooperation, with the fifth session of negotiations taking place at UN Headquarters in New York from 3 to 13 August 2026.
The process is expected to continue through 2027, with the objective of producing final instruments for consideration by the UN General Assembly.
The negotiations cover several major areas of international taxation, including the allocation of taxing rights, taxation of cross-border services and mechanisms for preventing and resolving tax disputes.
Tax Justice Network has been among the organisations advocating strongly for a shift towards unitary taxation and a greater allocation of taxing rights to jurisdictions where multinational companies conduct genuine economic activity.
What Happens to Tax Havens?
One of the biggest implications of the proposed system would be its potential impact on traditional tax-haven structures.
Under a unitary approach, simply registering a company or locating intellectual property in a low-tax jurisdiction would provide less benefit if the company has little genuine economic activity there.
For instance, if a multinational’s workforce and customers are concentrated overwhelmingly in countries outside the jurisdiction where its profits are recorded, the tax authority of the booking jurisdiction could have a much smaller share of the group’s taxable profits under a formula-based allocation system.
The Tax Justice Network argues that this could fundamentally weaken the economic model of jurisdictions that attract profits without attracting comparable levels of real business activity.
A Potential Revenue Opportunity, But Also a Policy Challenge
For Nigeria, an additional $2.5 billion annually would be significant.
But the bigger question may be whether Nigeria has the administrative capacity to capture and sustain the potential revenue.
A more sophisticated international allocation system would require strong access to multinational financial information, effective data-sharing arrangements, reliable taxpayer identification systems and the capacity to analyse complex corporate structures.
It would also increase the importance of international cooperation between tax authorities.
Nigeria’s ongoing tax administration reforms, including the transition to the new 2025 tax framework and its emphasis on clearer administration and modernised enforcement, therefore become increasingly relevant. The Federal Government’s 2026 transition guidelines emphasise the need for clarity, fairness and administrative certainty in implementing the new tax laws.
Africa’s Role in the Global Tax Debate
The significance of the UN process extends beyond the potential revenue figures.
For African countries, the negotiations represent an opportunity to influence international tax rules rather than simply adapt to rules developed elsewhere.
The UN process has been designed as a Member State-led negotiation, with sessions scheduled across 2025, 2026 and 2027.
The growing push for a greater allocation of taxing rights to countries where economic activity occurs reflects a wider concern among developing economies: that the current international tax architecture does not always reflect where modern businesses actually create value.
For countries with large populations, growing consumer markets and expanding digital economies, that distinction could have major fiscal consequences.
Africa Tax Review Analysis
The proposed “pay-where-you-play” model could represent one of the most consequential developments in international taxation for African economies in decades.
For Nigeria, the potential $2.5 billion annual gain is certainly headline-worthy, but the deeper issue is the principle behind the figure.
If multinational profits are increasingly allocated according to where companies employ workers, serve customers and create economic value, countries such as Nigeria could gain greater taxing rights without necessarily increasing their headline corporate tax rates.
However, the outcome is far from certain.
The UN negotiations are still underway, and the final allocation formula, implementation mechanisms, interaction with existing tax treaties and the treatment of different types of multinational income will determine how much revenue individual countries ultimately receive.
Nigeria’s new tax framework means the country is already moving towards a broader concept of taxable economic presence. The emerging global system could therefore strengthen that direction—or create new compliance, treaty and administrative questions for both Nigerian tax authorities and multinational businesses.
The bigger takeaway is clear: the global tax debate is increasingly moving away from where multinational profits are booked and towards where economic value is actually created.
For Africa, that could be a significant shift in the balance of global taxing rights.
