The tax reform bills proposed by the administration of President Bola Tinubu will lift pressure on Nigerian workers, according to the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele.
Oyedele gave this explanation while appearing before senators during the plenary to brief the lawmakers on the need to pass the bills on Wednesday, adding that the bills aim to review the sharing formula of the Value Added Tax (VAT) to accommodate what each state will get for what is consumed within their territory.
President Tinubu transmitted four tax bills – the Nigeria Tax Bill 2024, the Tax Administration Bill, the Nigeria Revenue Service Establishment Bill, and the Joint Revenue Board Establishment Bill – to the National Assembly for approval in September.
Mr Oyedele said if the bills are passed and assented to by the president, 30 percent of Nigerians who earn between N50,000 to N70,000 monthly will be exempted from paying tax to the government because they are classified as poor people.
“These proposals, if approved by the Senate, will reduce the tax on 90 percent of our workers, both in the private and the public sector, and it will exempt more than 30 percent of our citizens who earn about minimum wage, around 50,000, 60,000, 70,000 Naira,” he said.
Mr Oyedele noted that Nigerian workers who earn above N70,000 monthly will commit to payment of taxes.
He explained that those earning N100 million monthly will pay 25 percent of their income as tax.
“Then the remaining 10 percent who are not so poor will now pay a little bit more. The top rate today is 24 percent in the long, and we are proposing it goes to 25 percent. We are doing some other reforms around allowances and relief.
“So effectively, if somebody earns 100 million Naira a month, the maximum they will pay even on that approval side is only 25 percent. If they were in South Africa, they would be paying 41 percent. If they were in Kenya, they would be paying 35 percent. Of course, if they were in the UK or the US, they would be close to 40 percent, but we are doing only 25 percent.”
He also noted there will be changes to VAT sharing formula, adding the tax reform bills prescribed that every state will receive credit for consumption within their territory and that the state government will only have the power to collect sales tax, leaving the tax on import and international services for the federal government.
“Number one, every state will collect less than half of what they are getting now. Number two, businesses will struggle because you bought something in Kaduna and you are selling it in FCT. They will not allow you for the input, and the more the cost piles up, the more businesses will struggle,” he said in his own words.
He further explained if states should begin to collect VAT, they would not be able to collect import VAT, which would be collected by the federal government.
Oyedele also said the tax reform bills will review the percentage formula for sharing VAT by the federal, state and local governments.
The current formula for sharing VAT prescribes that the federal government should take 15 percent, the states 50 percent and the local government 35 percent.
The new law will see the FG collect 10 percent, states 55 percent, and LGAs 35 percent.
