The Federal Government has announced that Nigerians earning the new national minimum wage, or slightly above, will be exempt from the Pay As You Earn (PAYE) tax under the upcoming tax reform bills. The announcement was made by Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reform Committee, during a session addressing public concerns on the bills, which have sparked debates nationwide.
In July, President Bola Tinubu approved a wage increase from ₦30,000 to ₦70,000. However, the proposed reforms, currently under review by the National Assembly, have faced pushback from some northern elites, who argue that their regions may not benefit.
According to Oyedele, individuals with monthly incomes up to ₦1.7 million will see a reduction in their PAYE taxes. Notably, those earning the minimum wage and slightly higher will be entirely exempt. The current income tax structure, which was last updated in 2011, has led to “fiscal drag,” pushing low-income earners into higher tax brackets due to inflation, Oyedele explained.
The exemption plan is expected to benefit about 98% of workers in both public and private sectors, with only the top 2% experiencing a slight tax increase, capped at 25% for high earners. Oyedele highlighted that one-third of the lowest-income workers would be exempt from taxes altogether, while middle-income earners would also enjoy reduced tax rates.
“This approach aligns with the policy of avoiding taxes on poverty,” Oyedele remarked. He added that self-employed individuals and entrepreneurs would be eligible for similar exemptions as those in formal employment.
The VAT reform in the proposed bills includes a zero-tax rate on essential items like food, healthcare, and education. Rent and public transport are also exempt, providing relief for low-income households. These categories account for roughly 82% of household expenses, ensuring significant alleviation of living costs.
Addressing potential taxation on remote workers, Oyedele noted proposed changes to income tax laws aimed at supporting remote job opportunities for Nigerians in the global outsourcing market. This move seeks to bolster youth participation in the digital economy.
The reform bills will also remove subnational consumption taxes, leaving only VAT in place. Oyedele clarified that concerns about a potential decline in state revenue would be mitigated through a 5% equalization transfer fund, ensuring no state faces immediate financial disadvantages under the new system.
In response to questions about merging or scrapping revenue agencies like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) or the Nigerian Customs Service (NCS), Oyedele confirmed that these agencies would not be affected. Instead, they will continue focusing on their core regulatory duties, with their funding allocated through the federal budget, while the responsibility for collecting regulatory fees would be streamlined under the new framework.
The reform measures are intended to simplify tax processes, promote fairness, and stimulate economic growth across the country.
