If a new income tax bill is passed by the National Assembly, Nigerians earning N100 million and above monthly will face a 25 percent personal tax rate.
This is the submission of the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele at a breakout session of the ongoing 30th Nigeria Economic Summit (NES) organized by the Nigerian Economic Summit Group (NESG) and the Ministry of Budget and National Planning in Abuja on Monday.
According to him, there is a need to strike a balance between easing the tax burden for lower-income earners and ensuring the wealthy contribute more to government revenue.
Oyedele advocated for a more streamlined and equitable tax system in the country, stressing that 90 percent of Nigeria’s current taxpayers are people who should not be taxed in the first place.
In his submission, he stated, “If you earn N100 million a month, we are taking up to 25 percent from the rich people. That’s because we need to balance the books.”
Oyedele also said the government is prepared and determined to ensure that the right individuals pay taxes, noting that his committee is actively working to achieve the goal.
The fiscal policy expert said the proposed changes are expected to take effect from January 2025, based on the passage of the bill by lawmakers.
Oyedele disclosed that, for middle-income earners making N1.5m or less per month, their personal income tax obligations would decrease while those earning higher amounts would see incremental increases in their tax rates, eventually reaching 25 percent. Lower-income earners would be fully exempt from personal income tax.
While explaining that the reforms also aim to ease the tax burden on businesses, he said, “Today, whatever VAT you (businesses) pay on assets—whether you’re building a factory, buying a laptop, or vehicles—you bear it. This increases your cost, and therefore, your pricing will go up. Once our reforms are implemented, you get the credit back 100 percent on services and assets.
“People will pay tax once we decide that they have to pay. What we realize is that almost 90 percent of people who are paying taxes are those who should not have been paying in the first place.
“So that’s where we came up with the data that 97 percent of the informal sector should be formally exempted from taxes. People do not understand where we are coming from. They’re not the ones to pay taxes. They’re just trying to survive.”
When probed on how his committee will ensure the right individuals pay taxes, Oyedele said the team would utilize primary data identification channels to accurately bring the appropriate group of taxpayers into the tax bracket.
He added that the corporate income tax rate is set to drop from 30 percent to 25 percent , which he described as “huge” for businesses.
Other significant tax adjustments include a reduction or elimination of VAT on essential goods and services such as food, health, education, accommodation, and transportation.
These essential services make up a large portion of household expenditure for the lower-income population, and the proposed reforms aim to lessen their financial burden.
However, Oyedele acknowledged that not all sectors would benefit from reduced tax rates. For other goods and services, the VAT rate would increase to ensure the government’s revenue book balance.
He also pointed out that inflation had already acted as a “disorderly” tax on the population, eroding the value of their money without the need for legislation.
In addressing concerns over tax incentives and waivers, Oyedele argued that indiscriminate incentives harm the economy and that removing unnecessary incentives could relieve the business sector without costing the government revenue.
He concluded, “We cannot give all the incentives you are asking for. We think the biggest low-hanging fruit is removing these incentives, and that’s exactly what we are doing.”
