Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has announced that Nigerians earning N100 million and above monthly may soon be subjected to a 25 percent personal income tax under a new bill currently under consideration by the National Assembly. This announcement was made during a breakout session at the 30th Nigeria Economic Summit (NES) in Abuja on Monday, October 14 2024.
Oyedele explained, “If you earn N100 million a month, we are taking up to 25 percent from you as a rich person. That’s because we need to balance the books.” The proposed legislation aims to relieve lower-income earners with those earning N1.5 million or less per month seeing a reduction in their tax obligations while higher earners will experience incremental tax increases.
Lower income individuals would be fully exempted from personal income tax, a move Oyedele described as essential to creating a more equitable tax system. He stated, “Today, almost 90 percent of people who are paying taxes are those who should not have been paying in the first place.”
The reforms are set to take effect from January 2025, pending passage by the National Assembly and presidential assent. Oyedele highlighted the need for a balanced approach: “We must ensure the wealthy contribute more to government revenue while easing the tax burden on lower-income earners.”
Oyedele stressed that the corporate income tax rate is expected to decrease from 30 percent to 25 percent, which he called a significant relief for businesses. He noted that current VAT burdens increase operational costs, stating, “Whatever VAT you (businesses) pay on assets, you bear it. This increases your cost, and therefore, your pricing will go up.”
The proposed changes also aim to reduce or eliminate VAT on essential items and services, including food, health, education, accommodation and transportation. Oyedele emphasised that these services are vital for lower income households and the adjustments aim to alleviate their financial strain.
He acknowledged that not all sectors would benefit from lower tax rates, as VAT for other goods and services might increase to maintain government revenue.
Regarding tax incentives and waivers, Oyedele warned that indiscriminate applications could harm the economy. “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,” he concluded.
As the bill progresses, the focus remains on ensuring that the right individuals are taxed appropriately with Oyedele affirming, “People will pay tax once we decide that they have to pay.”
