The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has announced the Nigerian Government’s proposal to increase the Personal Income Tax(PIT) on wealthy Nigerians to 25% in 2025.
Speaking at the 30th Nigeria Economic Summit, Oyedele said the new tax policy, already contained in the Economic Stabilization Bill currently at the National Assembly, states that Nigerians earning above N1.5 million will pay more tax in the coming months.
He said only 17% of Nigerians and 30% of businesses pay taxes. He attributed this to the lack of trust in the Nigerian government. He stressed that Nigeria is working to close its 70-75% tax gap.
“Many people don’t like to pay taxes, but they often fail to realise 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.”
“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 increase. 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.
“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: “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 Nigeria’s tax system, 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 harmonise our tax collection processes. We are committed to improving how we collect taxes.”
Earlier this month, Oyedele announced the publication of the 2024 Withholding Tax Regulations in the official gazette.
In September of this year, the Federal Executive Council approved the Economic Stabilisation Bills proposed by Oyedele’s committee. These bills targeted 15 tax, fiscal, and establishment laws in Nigeria.
