Nigeria?s wealthiest citizens will be subject to a Personal Income Tax (PIT) rate of 25% starting next year. Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, announced this during the ongoing #NES30 conference in Abuja.

Speaking as a panelist in the session titled ?Fiscal and Monetary Policy Reforms: Removing Barriers to Private Sector Investment,? Mr. Oyedele explained that the tax bills currently before the National Assembly aim to provide relief to Nigerian taxpayers. Once passed, the new law will take effect in January 2025, reducing the tax burden on low-income earners while imposing higher taxes on the wealthy.

?Many people don?t like to pay taxes, but they often fail to realize that those taxes will eventually benefit them,? Oyedele said. ?We have been very intentional about reducing the tax burden on businesses. For instance, today, whatever VAT you pay on assets?whether you?re building a factory, purchasing a laptop, or buying vehicles?is borne entirely by the business. This increases your costs, which in turn raises prices. However, with our reforms, you will receive a 100% credit on services and assets.?

He continued, ?Additionally, your corporate income tax rate will be reduced from 30% to 25%, which is significant. These bills are currently with the National Assembly, and we plan to implement them from January 2025.?

On personal income tax, Oyedele noted, ?Those in this room may not appreciate this because there are wealthy individuals present. If you earn 1.5 million naira a month, your personal income tax bill will decrease. Those at the lower end will be completely exempt. However, for those earning more, the rate will increase incrementally, reaching 25% for the highest earners.?

Oyedele emphasized the need for balance, stating, ?Today, if you earn 100 million naira a month, few are paying the effective 19% personal income tax rate. We are raising this to 25% for the wealthy, which is crucial.?

He elaborated on the economic landscape, saying, ?Around 80% of the Consumer Price Index (CPI) basket comprises essential needs such as food, health, education, accommodation, and transportation. On average, households spend 32% of their income on these basics. For lower-income households, this figure approaches 100%. To alleviate this burden, we are reducing the VAT on these essentials to 0%. This means not only is there no VAT, but any VAT incurred during the production of these items will be refunded by the government.?

Mr. Oyedele also addressed the broader context of taxation, stating, ?To view taxation in isolation is a mistake. Taxation is an outcome of economic activities. We collect taxes to enhance the lives and livelihoods of the people. Any policy that negatively impacts people?s lives should be rectified. We need to fix the policy, not the people.?

He acknowledged the complexity of the tax system in Nigeria, noting, ?There are approximately 60 official taxes and over 200 unofficial taxes, including taxes on deceased individuals.?

?The solution isn?t simply to distribute food or cash,? he added. ?We must harmonize our tax collection processes. We are committed to improving how we collect taxes.?

Oyedele revealed that Nigeria currently experiences a 70-75% tax gap, stating, ?If every individual paid the taxes they are supposed to pay, we could quadruple our current tax revenue.? He criticized the various tax waivers implemented by successive administrations, describing them as often nonsensical and distorting to the economy. (Vanguard)

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