During the 30th Nigeria Economic Summit, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, announced proposed changes to the personal income tax system that could significantly affect wealthy Nigerians. If a new tax bill currently under consideration by the National Assembly is passed, individuals earning N100 million or more monthly would face a 25 percent personal income tax rate. Oyedele highlighted this change as part of a broader initiative aimed at creating a more equitable taxation landscape in Nigeria, emphasizing that about 90 percent of current taxpayers may not need to be taxed at all. His call for a revised tax system seeks to alleviate the burden on lower-income earners while ensuring that those with substantial incomes contribute a fairer share to government revenue.
The proposed tax reforms are part of a larger effort to establish a balanced fiscal policy that adequately addresses the needs of various income groups, particularly lower earners who are currently exempt from personal income taxation. Oyedele clarified that those earning N1.5 million or less per month would see a decrease in their tax obligations, while tax rates for higher income brackets would progressively increase, ultimately reaching the proposed 25 percent for the highest earners. This graduated approach aims to relieve lower-income households, allowing the government to redistribute the tax burden more equitably while addressing fiscal deficits.
Beyond personal income taxes, Oyedele emphasized improvements for businesses, particularly in relation to Value Added Tax (VAT). Current regulations mandate that businesses bear the VAT on capital expenditures such as factory constructions and equipment purchases, which raises operational costs and pricing. The new reforms would enable businesses to receive a 100 percent credit back on VAT paid for services and assets, thereby lowering business expenses and potentially leading to more competitive pricing for consumers. This is intended to foster an environment where compliance with tax regulations is more straightforward, allowing businesses to thrive while contributing to state revenue.
Oyedele’s remarks also focused on the large informal sector, where substantial numbers of Nigerians operate without formal tax obligations. He indicated that nearly 97 percent of this informal workforce should be exempt from taxation, as many individuals are struggling to meet basic needs in a challenging economy. The committee plans to leverage primary data identification channels to accurately determine who should contribute to tax revenues, ensuring a fair system that targets those who can afford to pay.
Significantly, Oyedele revealed plans to reduce the corporate income tax rate from 30 percent to 25 percent, which he deemed a substantial positive change for businesses. Accompanying this is a promised reduction or elimination of VAT on essential goods and services critical to lower-income households, including food, health care, and education. These reforms are designed to help mitigate financial pressures on lower-income families who allocate a large portion of their budgets to such essentials. However, he warned that not all sectors would benefit from reduced tax rates, noting that some goods and services would see VAT increases to balance government revenue.
Reflecting on the broader economic environment, Oyedele pointed out that inflation acts as a kind of “disorderly” tax that affects the purchasing power of the population, often without legislative action. He raised concerns about the indiscriminate use of tax incentives and waivers, arguing that they can create distortions in the economy and ultimately do more harm than good. Therefore, he believes it is critical to streamline these incentives to protect governmental revenue streams. Overall, the proposed reforms represent a significant shift in Nigeria’s tax policy aimed at fostering a more equitable and responsive fiscal framework, ultimately aiming for a system that supports both economic growth and social equity.
