The Presidential Committee on fiscal policy and tax reforms, chaired by Mr. Taiwo Oyedele, has proposed significant changes to Nigeria’s personal income tax rates. The committee recommends a reduction in the tax rate for Nigerians earning less than N2 million monthly, while suggesting an increase for those earning above N5 million.
Tax Rate Adjustments
During a public assessment workshop held in Lagos, Mr. Oyedele highlighted the need for a more progressive tax system. He stated, “Charging the same tax rate for all Nigerians regardless of income means that our tax policy is not progressive.” He compared Nigeria’s tax system to those of more advanced economies with higher tax rates for the wealthy.
“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,” Oyedele explained.
Establishment of Central Tax Collection Agency
The committee also recommended the establishment of a central tax agency, named the Nigerian Revenue Service, to replace the over 100 existing collection agencies operating at federal, state, and local government levels. Furthermore, they suggested replacing the joint tax board with a Nigeria Revenue Commission.
Addressing Systemic Issues
In addition to tax rate adjustments, the committee urged the government to tackle systemic corruption, prioritize spending on basic needs to alleviate poverty, limit borrowing, and improve public procurement efficiency. These measures are aimed at creating a more efficient and fair tax system.
Implementing Quick Wins
Initial recommendations, dubbed “quick wins,” have already been implemented. These include removing the value-added tax (VAT) on diesel and eliminating multiple taxes in the informal sector.
Simplifying Multiple Taxation
Addressing the issue of multiple taxation, Mr. Oyedele stated that the committee’s final recommendation would reduce the number of taxes to eight, down from approximately sixty. The proposed taxes are:
- Income Tax
- VAT
- Customs Duties
- Excise Tax
- Harmonised Levy
- Special Levy
- Stamp Duties
- Property Tax
The harmonised levy will include all local government levies, while the special levy will cover education tax for TETFund, NASENI, and others. According to the draft document, stamp duties will be collected solely by state governments, and the special levy will be collected exclusively by the federal government.
These reforms aim to streamline the tax system, making it more efficient and equitable for all Nigerians.