The Federal government of Nigeria has said its proposed tax laws will exempt minimum wage earners from paying the ‘Pay as You Earn” taxes. The proposed law is part of the recommendations of the Presidential tax reform committee led by Taiwo Oyedele.
President Tinubu had set up the tax reform committee to review the country’s tax laws and create a more inclusive tax system. Since it was set up, the committee has come up with several recommendations all of which have been captured in the Tax Reform bill and forwarded to the National Assembly.
One of such recommendations is the need to exempt minimum wage earners from paying the PAYE taxes. The government is looking to reduce the tax burden on the low income earners in Nigeria. This means those earning below 1.7 million per month will pay a reduce tax while those earning above that will pay more.
Essentially, these thresholds will result in about 98% of workers in the public and private sector paying lower taxes while the top 2% will pay slightly more in a progressive manner up to 25% for high net worth individuals.
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The government had also unveiled a tax incentive for small business to boost productivity and reduce heavy tax burden on MSMES in the country.
In addition, the proposed bill seeks to harmonise taxes in Nigeria and curb the problem of multiple taxation. However, its has sparked mixed reactions with the Northern region rejecting the VAT distribution section of the bill. The controversial section proposes a derivation-based model for Value Added Tax distribution.
