Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reform Committee, announced that Nigerians earning the minimum wage or slightly above it will be exempt from the Pay As You Earn (PAYE) tax as part of the new tax reforms. This disclosure was made through Oyedele’s X handle while addressing public questions regarding the proposed tax reform bills.
The new tax structure, which is part of President Bola Tinubu’s fiscal plan transmitted to the National Assembly in September 2024, aims to address the “fiscal drag” caused by inflation and outdated income bands. According to Oyedele, the reform will lower taxes for approximately 98% of workers in both the public and private sectors. The top 2% of high-income earners will see a slight increase in their tax rates, which will be progressively scaled up to 25% for high-net-worth individuals.
The tax bills, which include the Nigeria Tax Bill 2024 and the Tax Administration Bill, aim to streamline the country’s tax system, eliminate multiple state consumption taxes (except for VAT), and adjust tax rates to simplify tax filing for individuals. Additionally, the reform proposes a shift to a derivation-based model for VAT distribution, which would allocate tax revenues based on where goods and services are consumed rather than where companies are based.
Oyedele assured that no state would be worse off in the short term due to the reforms, as the federal government will provide equalization transfers to offset any revenue shortfall. This is expected to boost economic activity and state revenue in the long run.
