Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, says workers earning the new minimum wage or slightly more will be fully exempted from pay-as-you-earn (PAYE) tax in the proposed reforms.
Oyedele, answering frequently asked questions on the new tax reforms via X on Monday, reiterated that the plan aims to reduce the overall tax burden rather than increase it, and ensure a level playing field for all by avoiding penalising compliant taxpayers and rewarding evaders.
On September 23, the federal executive council (FEC) approved the economic stabilisation bills that seek to amend tax policies.
Under the new bill, the personal income tax for Nigerians earning above N1.5 million will be increased.
However, in his post, Oyedele said individuals earning about N1.7 million or less per month will pay lower PAYE tax.
He said the thresholds will result in about 98 percent of workers in the public and private sectors paying lower taxes, while the top 2 percent will pay slightly more, with rates rising progressively to 25 percent for high-net-worth individuals.
On how the reforms will impact ordinary Nigerians, Oyedele said lowest income earners would be fully exempted from tax, adding that “this is consistent with the policy philosophy of not taxing poverty”.
“Also, self-employed persons and entrepreneurs will enjoy tax exemptions available to individuals in formal employment,” he said.
“The VAT reform includes a zero (0%) rate for food, education, health, and exemption for rent and public transportation.
“These items constitute an average of 82% of household consumption and nearly 100% for low-income households, which will ease the rising cost of living for the masses.
“In addition, there are proposed changes to the income tax laws to facilitate remote work opportunities for Nigerians in Nigeria within the global business process outsourcing sector. This will empower our youths to play a key role in the digital economy space.”
‘PROPOSED REFORMS WILL ADDRESS COMPLEXITY OF TAXES FOR BUSINESSES’
Regarding the reforms’ advantages to businesses, Oyedele said the proposed reforms shall address the complexity of taxes and compliance requirements that hinder investment and competitiveness.
“Addressing these issues will, therefore, facilitate economic growth and boost the country’s GDP,” he said.
“Some of the proposals include reducing the corporate income tax rate from 30% to 25% over the next two years and replacing earmarked taxes on companies with a single, harmonised levy at a reduced rate.
“Other changes include removing minimum tax on loss-making companies and those with low margins, granting input VAT credit to businesses on assets and services to lower investment costs, allowing taxes on foreign currency transactions to be paid in naira, giving WHT and VAT exemptions to small businesses, and raising the corporate income tax exemption threshold to N50 million in annual turnover.
“There will be an office of the tax ombudsman to check administrative excesses and protect vulnerable taxpayers.
“In addition, tax incentives are being rationalised with clear rules to ensure certainty and create a level playing field for all investors, while a new priority sector incentive regime will replace the current pioneer status scheme, etc.”
He also explained that the bill seeks to leverage technology to merge taxes and harmonise revenue administration, allowing government agencies to focus on their primary roles rather than revenue targets.
‘GOVERNMENT INSTITUTIONS, PRIVATE SECTOR FORMULATED TAX REFORMS’
Oyedele said the reforms were developed with input from 80 people across the country’s geopolitical zones, representing over 20 government institutions, the organised private sector, trade associations, professional bodies, service firms, and civil society.
According to Oyedele, about 45 students from 22 universities across Nigeria supported the secretariat work, conducted research, and participated in committee meetings on a rotational basis.
“Tailored sessions were conducted for more than 40 sectors, representing over 90% of the economy, as well as focus group engagements for people with disabilities, youths, and Nigerians in the diaspora,” he said.
“The committee requested input from all stakeholders and received memoranda from people in all 36 states and the FCT.
“Further consultation sessions were organised for CFOs, with over 300 companies represented, journalists, public analysts, tax consultants, and business owners.
“We also engaged with the Nigeria Governors’ Forum, the federal executive council, national economic council, finance commissioners, and the Joint Tax Board, among others.”
Oyedele said there are other proposals at various stages of implementation, including the 2024 withholding tax (WHT) regulations, executive orders, and the 2024 national fiscal policy.(The Cable)
