A Shift in Tax Policy: New Income Tax Rate for Nigeria's Wealthy on the Horizon

 

Taiwo Oyedele, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee

In a recent announcement that has caught the attention of many, Taiwo Oyedele, the chair of the Presidential Fiscal Policy and Tax Reforms Committee, revealed a significant proposed change in Nigeria's tax landscape. During a session at the 30th Nigeria Economic Summit in Abuja on October 14, Oyedele laid out the implications of a new tax bill that, if passed by the National Assembly, would impose a personal income tax rate of 25% on Nigerians earning N100 million or more monthly.


The proposal aims to address the ongoing discussion around equitable taxation finding a way to ease the tax burden on lower-income individuals while ensuring that those with deeper pockets contribute their fair share to the nation’s revenue. Oyedele emphasized the necessity of this balance, stating, "If you earn N100 million a month, we’re taking up to 25 percent from the rich people. That’s because we need to balance the books."


This tax reform isn't just about raising rates; it’s also about rethinking the broader tax framework. Oyedele pointed out how the current value-added tax (VAT) system can inflate costs for businesses. He noted that when businesses pay VAT on everything from building factories to purchasing laptops and vehicles, it directly affects their pricing structures.


Under the proposed reforms, the aim is to offer businesses a better deal. Once fully implemented, businesses would receive a full 100% credit back on VAT paid for services and assets, which could alleviate some financial strain. The concept is that these adjustments will not just boost the governments income but also establish a system that ensures groups make a contribution, to public funds promoting fairness, in society.


As this proposal makes its way through legislative discussions, it opens up an important dialogue about how Nigeria can reshape its tax policies to promote fairness and foster economic growth. Constructive discussion around this topic will be crucial as various stakeholders weigh in on how best to implement these reforms.