Over 90% of Nigerian Workers to Benefit from Lower Taxes Under Proposed Reforms – Taiwo Oyedele

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has announced that over 90% of public and private sector workers in Nigeria will pay lower taxes if the proposed tax reforms are implemented.

Oyedele shared this update on Monday through his X (formerly Twitter) handle, where he regularly educates the public about the reforms’ implications.

In October 2024, President Bola Tinubu introduced four Tax Reform Bills to the National Assembly: the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill. These bills aim to consolidate tax laws, simplify tax administration, and boost revenue generation.

Discussing the reforms’ impact on personal income tax, Oyedele explained:

• Individuals earning about ₦1.7 million or less per month will pay lower PAYE taxes.
• Workers earning the new minimum wage or slightly more will be fully exempted from taxes.
• High-income earners will experience progressive tax increases, with ultra-high-net-worth individuals taxed up to 25%.

He further noted that the new structure includes provisions for rent relief of up to ₦200,000 per annum, benefiting low-income earners. Individuals earning up to ₦1 million annually (about ₦83,000 per month) will effectively be exempt from taxes.

To address anomalies in the current tax system, Oyedele emphasized that the proposed reforms will prevent situations where workers earning marginally more than the exemption threshold are left worse off than those within the threshold. For instance, under the new system, everyone will qualify for the initial tax-free bracket, eliminating the inefficiencies of the existing tax framework.

He also highlighted that the current personal income tax table, introduced in 2011, has become outdated. This has caused “fiscal drag,” where low-income earners are taxed at the same rate as wealthy individuals. For example, someone earning ₦400,000 monthly is taxed at the same marginal rate as someone earning ₦20 million.

Key provisions in the tax reform bills include:

• Increasing the Value Added Tax (VAT) rate from 7.5% to 10% by 2025, with further increases anticipated.
• Imposing a 5% excise duty on telecommunications services.

Despite strong opposition from various stakeholders, President Tinubu has reaffirmed his commitment to the reforms, ruling out the possibility of withdrawing the bills from the National Assembly.

These proposed changes aim to simplify Nigeria’s tax system, promote equity, and reduce the tax burden for the majority of workers.