economy
Tax committee proposes reduction in personal income tax for Nigerians earning less than N2 million monthly
The Presidential Committee on fiscal policy and tax reforms chaired by Mr. Taiwo Oyedele has proposed reduction in the personal income tax rate for Nigerians earning less than N2 million monthly and increase the rate for those earning above N5 million.
He stated this during the public assessment workshop on the proposed changes to the country’s tax laws held in Lagos.
According to him, charging the same tax rate for Nigerians irrespective of earning means that the country’s tax policy is not progressive. He referred to more advanced economies with much higher tax rates for the wealthy.
He stated, “We are proposing that personal income tax rate should be reduced for anybody who is earning around N2 million per month or less but the personal income tax rate should be increased for anybody earning N5 million per month or more. Between N2 million and N5 million, your PIT rate would remain the same.”
“If you earn N5 million or more, your tax rate needs to go up. We are still working the details with the Governors because they are the ones mostly affected by this. In Nigeria today, if you earn N20 million per year your tax rate is 19%. If you earn N1 billion monthly, your tax rate is the same. So our tax rate is not progressive”
Establishment of central tax collection agency
The Presidential Tax committee also recommended that Nigeria establish a central tax agency, named the Nigerian Revenue Service, to replace the over 100 existing collection agencies operating at the federal, state, and local government levels.
Furthermore, he noted that the joint tax board would be replaced by a Nigeria Revenue Commission.
Part of their recommendations also include urging the government to address systemic corruption, prioritize spending on basic needs to alleviate poverty, limit borrowing, and improve public procurement efficiency.
Initial recommendations dubbed the quick wins that have been implemented include removing the value-added tax on diesel and eliminating multiple taxes in the informal sector.
Multiple taxation and the number of taxes to be paid
On multiple taxations, Mr. Taiwo Oyedele stated that the final recommendation of the committee on taxes would be eight—a reduction from the about sixty taxes currently being levied on individuals and businesses across the country.
The eight taxes are; Income tax, VAT, Customs duties, Excise tax, harmonised levy, special levy, stamp duties and property tax.
He explained that the harmonised levy comprises all the levies that local governments collect while the special levy comprises education tax for TETFund, NASENI and others.
According to the draft document, the stamp duties which comprise EMTL would only be collected by state governments while the special levy would be collected by federal governments solely.
