The Federal Government of Nigeria has introduced new Tax reforms to raise personal income taxes for high-income citizens to close the tax shortage and enhance Revenue generation. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, disclosed this during the 30th Nigeria Economic Summit in Abuja. Under the proposed plan, part of the Economic Stabilization Bill currently being considered by the National Assembly, Nigerians earning above #1.5 million per month will see their income levy rates increase, reaching 25% by 2025.
Oyedele emphasised that this adjustment ensures that the wealthiest individuals contribute a fair share toward government revenues while alleviating the fee burden on lower-income earners. He remarked that only 17% of citizens and 30% of businesses are fulfilling their duty obligations, primarily due to distrust in the government. This levy evasion increased the nation’s tax deficit, which Oyedele estimates to be between 70% and 75%. Should this deficit be addressed and compliance enhanced, he anticipates that national revenue could rise to as much as four times its existing levels.
A national tariff portal will be created to simplify and enhance payments.
Furthermore, the reforms, part of broader fiscal measures endorsed by the Federal Executive Council (FEC), will increase levies for the wealthy and streamline the tariff payment process for all citizens. One initiative is developing a national tariff portal, similar to systems in countries like South Africa, to make payments more transparent and seamless. As noted by Oyedele, the country’s present structure is inadequate, leading to many individuals paying levies unnecessarily. He explained that about 90% of current payers are individuals and businesses struggling to survive and should be exempt from paying tariffs.
This reform, therefore, seeks to correct such imbalances by ensuring that only those earning high incomes, like individuals making #100 million and above monthly, are charged at the higher 25% rate. The new policy would also provide relief to middle-income earners. Individuals earning #1.5 million or less per month would see their tariff obligations decrease, while those earning above that threshold would experience incremental tariff rate increases. Oyedele mentioned that several segments of the population consist of individuals with lower incomes who would be completely free from personal wage levy according to the suggested modifications.
Corporate tax rate set to reduce to 25% under proposed fiscal reforms.
In addition to changes in income tax, the administration is working on enhancing corporate levy frameworks. Oyedele stated that the corporate rate, which currently stands at 30%, is set to decrease to 25% as part of the reforms. This decrease aims to ease the financial burden on companies frequently encountering elevated expenses linked to levies on vital resources and services. As an illustration, companies that presently incur VAT expenses on capital investments such as constructing factories or acquiring equipment are eligible to receive credits under the revised framework, which will decrease their total levy liabilities.
Moving forward, a vital part of the reform involves modifying VAT rates, especially for necessities. The VAT on food, healthcare, education, lodging, and transport will decrease or be removed entirely to relieve some financial strain on low-earnings families. However, the VAT on additional products and services will rise to maintain a stable revenue flow for the government. Oyedele expressed his views on the government’s implementation of tariff incentives, emphasising that arbitrary incentives and exemptions have negatively affected the economy.
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Lastly, the proposed policy aims to eliminate unnecessary incentives favouring a few while doing little for national progress. He contended that this approach would enhance the Economy without affecting government revenue. On the other hand, these changes demonstrate the administration’s resolve to establish a fairer levy system that emphasises justice, revenue collection, and economic consistency. Oyedele and his team strive to ensure that the right individuals and enterprises are adequately charged while tackling compliance challenges and simplifying procedures to rebuild confidence in the country’s tax system.