FG plans 25% tax on Nigerians earning above N100m

• Nigerians earning N100m or more monthly may face a 25% personal income tax if the National Assembly passes a new tax bill
• The reform aims to reduce the tax burden on 90% of current taxpayers, particularly lower- and middle-income earners
• The tax reforms are expected to take effect by January 2025, pending legislative approval

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has said that wealthy Nigerians earning N100m and above monthly will face a 25 per cent personal income tax rate if the National Assembly passes a new tax bill.

He stated that 90 per cent of the current taxpayers should not be taxed while advocating for a more streamlined and equitable tax system in the country.

This revelation was made during a breakout session at the ongoing 30th Nigeria Economic Summit organised by the Nigerian Economic Summit Group and the Ministry of Budget and National Planning on Monday, October 14, in Abuja.

Oyedele emphasised the need to balance easing the tax burden for lower-income earners and ensuring the wealthy contribute more to government revenue.

“If you earn N100m a month, we are taking up to 25 per cent from the rich people. That’s because we need to balance the books,” Oyedele stated.

The fiscal policy expert said the government is prepared and determined to ensure that the right individuals pay taxes, noting that his committee is actively working to achieve the goal.

He added that the proposed changes are expected to take effect from January 2025, based on lawmakers’ passage of the bill.

For middle-income earners making N1.5m or less per month, Oyedele disclosed that their personal income tax obligations would decrease. At the same time, those earning higher amounts would see incremental increases in their tax rates, eventually reaching 25 per cent. Lower-income earners would be fully exempt from personal income tax. The reforms also aim to ease the tax burden on businesses.

Oyedele noted: “Today, whatever VAT you (businesses) pay on assets, whether you’re building a factory, buying a laptop, or vehicles, you bear it. This increases your cost, and therefore, your pricing will go up. Once our reforms are implemented, you get the credit back 100 per cent on services and assets.

“People will pay tax once we decide that they have to pay. What we realise is that almost 90 per cent of people who are paying taxes are those who should not have been paying in the first place,” he said.

“So that’s where we came up with the data that 97 per cent of the informal sector should be formally exempted from taxes. People do not understand where we are coming from. They’re not the ones to pay taxes. They’re just trying to survive.”

Regarding how his committee is working to ensure the right individuals pay taxes, Oyedele said the team would utilise primary data identification channels to bring the appropriate taxpayers into the tax bracket accurately.

Additionally, the corporate income tax rate is set to drop from 30 per cent to 25 per cent, which Oyedele described as “huge” for businesses. Other significant tax adjustments include reducing or eliminating VAT on essential goods and services such as food, health, education, accommodation, and transportation. 

These essential services comprise a large portion of household expenditure for the lower-income population, and the proposed reforms aim to lessen their financial burden.

However, Oyedele acknowledged that not all sectors would benefit from reduced tax rates. The VAT rate would increase for other goods and services to ensure the government’s revenue book balance.

He also pointed out that inflation had already acted as a “disorderly” tax on the population, eroding the value of their money without the need for legislation.

In addressing concerns over tax incentives and waivers, Oyedele argued that indiscriminate incentives harm the economy and that removing unnecessary incentives could relieve the business sector without costing the government revenue.

VAT rate hasn’t been increased, remains 7.5%, Finance Minister Edun clarifies

Meanwhile, TheRadar earlier reported that the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, declared that the rate for Value-Added Tax (VAT) has not been increased but remains 7.5 per cent as contained in the relevant tax laws and chargeable on goods and services.

Edun’s clarification comes on the heels of recent media reports of an imminent increase in VAT following the statement by the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, in June that the plans to increase the VAT rate to 10 per cent will be implemented in phases.