25% tax rate proposed for Nigerians earning ₦100m+ monthly from 2025

As reported by Diaspora Digital Media (DDM), individuals earning ₦100 million or more monthly may soon face a 25% personal income tax rate if the National Assembly approves a proposed bill.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele shared the update at the 30th Nigeria Economic Summit, organized by the Nigerian Economic Summit Group (NESG) and the Ministry of Budget and National Planning in Abuja on Monday, October 14, 2024.

Oyedele noted that the current tax system places an undue burden on approximately 90% of taxpayers who are not ideally suited to bear the financial responsibility.

He emphasized the need for a fair and balanced tax system, ensuring that the wealthy are held accountable for their rightful contribution to national revenue.

“Individuals with a monthly income of ₦100 million will be subject to a tax rate of up to 25%, as part of our efforts to ensure fiscal balance and equitable revenue distribution,” he explained.

“The proposed tax amendments, effective January 2025, are designed to provide tax relief to middle-income earners and businesses, while implementing a progressive tax structure that requires higher-income individuals to contribute a fairer share of national revenue.”

Oyedele said “individuals with monthly earnings of ₦1.5 million or less will benefit from a reduced personal income tax rate while higher-income earners will face incremental tax rate increases, capped at 25%.”

“Furthermore, low-income individuals will be fully exempted from personal income tax obligations.”

The chairman stated that the existing tax framework necessitates reform, as an overwhelming majority nearly 90% of taxpayers are those who should not bear the financial burden.

He emphasized the need for a fairer tax structure, wherein tax payments are aligned with individual economic means.

Taiwo recommended that 97% of the informal sector be granted formal tax exemption, recognizing that their primary objective is survival.

He argued that the prevailing inflation rate has effectively levied an unofficial tax on the population, progressively devaluing their earnings without explicit governmental decree.

The chairman cautioned against excessive incentives, citing the need for strategic removal to drive economic growth.

The reforms are said to include a reduction of the corporate income tax rate from 30 per cent to 25 per cent. Also, Value Added Tax (VAT) on essential goods and services like education, transportation, food, accommodation and health would be reduced or totally removed to eradicate the financial burden of the lower-income earners.

To ensure comprehensive tax coverage, Oyedele said “him and his committee will utilize primary data identification channels to identify and incorporate the appropriate individuals and entities into the tax system.”

The Tax Reform Committee in Nigeria

The Tax Reform Committee in Nigeria is officially known as the Presidential Fiscal Policy and Tax Reforms Committee.

The committee was established on July 27, 2023 and inaugurated in August, 2023 by President Bola Ahmed Tinubu to review and redesign Nigeria’s fiscal system, focusing on revenue mobilization, quality of government spending, and sustainable debt management.

Key Objectives

The committee aims at reducing multiple taxes and levies to a few broad-based and easy-to-administer ones.

It streamlines revenue collection functions into a single agency per level of government.

Also, it leverages technology to improve revenue administration and reduce compliance costs and enhances revenue mobilization and transparent reporting.

Committee Composition

The committee is chaired by Taiwo Oyedele and comprises representatives from various stakeholders including tax practice, law, and accounting firms, Federal Ministry of Finance, Justice, and Trade, Nigerian Economic Summit Group, Organized Private Sector of Nigeria, Chartered Institute of Taxation of Nigeria and Institute of Chartered Accountants of Nigeria.

Expected Outcomes

The committee aims to achieve the repealing of existing taxes and levies, replacing them with new harmonized tax laws.

Also, it aims to prepare a unified list of taxes and levies and review the 2017 National Tax Policy.

Besides, it is expected to establish a national fiscal risk framework and improve revenue administration and taxpayer trust.

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