Nigerians are eagerly awaiting the National Assembly’s decision on the proposed tax reform bills. These reforms, led by Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, promise significant benefits for both small businesses and everyday citizens.
Simplifying Nigeria’s Tax System
The proposed bills—Nigeria Tax Bill, Nigeria Tax Administration Bill, Nigeria Revenue Service Establishment Bill, and Joint Revenue Board Establishment Bill—aim to fix key problems in the tax system. These include:
- Reducing the number of overlapping taxes.
- Streamlining revenue collection.
- Easing the tax burden on small businesses and low-income earners.
Key Benefits for Individuals
When these bills become law, they will:
- Exempt low-income earners from Pay As You Earn (PAYE) taxes.
- Reduce PAYE taxes for those earning up to ₦1.7 million monthly.
- Maintain zero percent VAT on essential goods and services, such as:
- Food.
- Healthcare.
- Education.
- Electricity generation and transmission.
Additionally, Nigerians will benefit from VAT exemptions on:
- Public transportation.
- Renewable energy.
- Baby products and sanitary towels.
- Rent and fuel products.
For low-income earners, there will also be:
- Tax breaks for wage awards.
- Transport subsidies.
Boosting Small Businesses
The reforms offer major tax relief for small businesses:
- Tax-free earnings: Companies with an annual turnover of ₦25 million to ₦50 million will enjoy full tax exemptions.
- Zero company income tax: Small businesses will not pay any company income tax.
- No withholding tax deductions: Business income for small enterprises will not face withholding tax.
Incentives for Job Creation
Employers hiring more people than in the past three years will receive tax incentives. This measure aims to encourage businesses to expand their workforce and support economic growth.
Clarity for Digital Economy
The reforms also address modern work trends and digital transactions. They introduce:
- Tax-friendly rules for remote workers and digital nomads.
- Clear guidelines for taxing digital assets, preventing double taxation while allowing businesses to deduct losses.
Additional Benefits
Other features include:
- Stamp duty exemption: Rent agreements below ₦10 million will not require stamp duty.
- High-income earner benefits: Real estate purchases and sales of shares up to ₦150 million will enjoy VAT and tax exemptions.
- Cap on taxable benefits: Accommodation benefits will be limited to 20% of annual income for taxation purposes.
Supporting States and Producers
Oyedele emphasized that states producing zero-VAT-rated goods will not lose revenue. The government will consider both consumption and production data to ensure fair distribution of tax benefits. He reassured Nigerians that all states contribute through consumption, even if their production is tax-exempt.
A Fairer System for All
By addressing these challenges, the proposed tax reforms aim to create a fairer, simpler, and more inclusive tax system. These changes will ease the financial burden on individuals, empower small businesses, and drive economic growth across Nigeria.
