Digital Ethicist Warns AI Adoption Threatens Sub-National Revenue as Autonomous Machines Replace High Earning Taxable Labour

Expert Olatunde Bakre warns that AI and automation are eroding Nigeria's PAYE tax base, urging authorities to tax machines to protect state and local revenue.

By: AXL Media

Published: Apr 9, 2026, 7:43 AM EDT

Source: Information for this report was sourced from Vanguard News

The Disruptive Shift in Human Capital Deployment

Nigeria’s financial landscape is currently undergoing a transformative but disruptive shift as artificial intelligence begins to replace human capital across various business strata. Historically, technological advancement focused on process re-engineering that empowered workers and improved benefits, maintaining a steady stream of tax revenue. However, according to Bakre, the emergence of generative AI and autonomous humanoids has created a new reality where productivity is becoming inversely proportional to the number of human employees, presenting a direct threat to the current tax model.

Erosion of High Value PAYE Contributions

The integration of AI technologies is specifically targeting knowledge workers, such as accountants, lawyers, and analysts, who have traditionally been the highest contributors to Pay As You Earn (PAYE) tax per capita. As these white collar roles are automated, state and local governments face a disproportionate revenue impact that extends beyond simple factory floor displacement. This phenomenon, described as tax decoupling, allows companies to reach record levels of profitability while government agencies fail to capture equivalent revenue due to the shrinking taxable workforce.

Tax Incentives and the Automation Bias

Current Nigerian government policies, including investment tax credits and capital allowances, inadvertently encourage companies to prioritize machines over humans. Bakre noted that businesses view expenditures like pension contributions, health insurance, and training funds as additional taxes associated with hiring staff, costs that do not exist when opting for automation. Consequently, companies are incentivized to utilize AI to reduce their tax liability while simultaneously enhancing their bottom line, leading to an increase in corporate tax but a significant reduction in taxable labour.