Kehinde Fajobi
Starting January 2025, Nigeria’s wealthiest individuals will face a 25% Personal Income Tax (PIT) rate as part of upcoming fiscal reforms. Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, made the announcement during the #NES30 conference in Abuja.
At a panel session on “Fiscal and Monetary Policy Reforms: Removing Barriers to Private Sector Investment,” Oyedele explained that the tax reforms aim to reduce the burden on lower-income earners while increasing taxes on higher-income individuals.
“Many people are reluctant to pay taxes but don’t realise that taxes ultimately benefit them,” Oyedele stated.
“We are focused on reducing the tax burden on businesses. Today, companies bear the entire cost of VAT on assets like factories, laptops, and vehicles, which increases their expenses and drives up prices. With these reforms, businesses will get a 100% VAT credit on services and assets.”
He further explained, “We are also lowering the corporate income tax rate from 30% to 25%. These bills are currently with the National Assembly, and we plan to roll them out by January 2025.”
Regarding personal income tax, Oyedele noted that higher earners will see increased taxes.
“If you earn 1.5 million naira a month, your personal income tax will reduce. For those on the lower end, there will be full exemptions. However, for higher earners, the tax rate will gradually rise, with the wealthiest paying 25%.”
He highlighted the need for balance in the tax system: “Currently, few individuals earning 100 million naira a month pay the effective 19% personal income tax rate. We’re raising this to 25% for the wealthiest, which is essential.”
On efforts to ease living costs, Oyedele explained that essentials such as food, healthcare, education, accommodation, and transport, which make up 80% of household expenses, will have reduced VAT.
“For low-income households, nearly 100% of their income goes towards these essentials. To alleviate this, we’re reducing the VAT on these necessities to 0%, and the government will refund any VAT paid during their production.”
Oyedele also emphasised the broader significance of taxation, saying, “Taxation is an outcome of economic activities. We collect taxes to improve people’s lives. If policies harm people, we must fix the policies, not the people.”
He criticised Nigeria’s complex tax system, which includes around 60 official taxes and over 200 unofficial ones, even on deceased individuals.
“We need to harmonise our tax collection processes. Simplifying this will improve how we collect taxes.”
Oyedele also pointed out the significant tax gap in Nigeria.
“If everyone paid the taxes they owed, we could quadruple our current revenue. The numerous tax waivers from past administrations have often been economically harmful and nonsensical,” he concluded.