The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, has condemned Nigeria’s current tax structure, arguing that it stifles economic growth by disproportionately taxing the poor and capital instead of focusing on profits.
Speaking at the 2025 Annual General Meeting of the Finance Correspondents Association of Nigeria in Abuja over the weekend, Oyedele stressed the need for a tax system that fosters business expansion rather than hindering it.
“The multiplicity of taxes and taxing agencies places an excessive burden on businesses, leading to frustration and closures across the country,” he said.
He emphasized that a tax system should support business growth before taxing profits, aligning with practices in developed economies.
Proposed Tax Reforms
The committee’s proposed tax reforms aim to consolidate multiple taxes and introduce a progressive Personal Income Tax structure, which includes:
– Exemption for earnings up to ₦800,000
– 15% tax on the next ₦2.2 million
– 18% tax on the following ₦9 million
– 21% tax on the next ₦13 million
– 23% tax on the next ₦25 million
– 25% tax on incomes above ₦50 million
For businesses, Corporate Tax rates will be revised as follows:
– Reduction from 30% to 27.5% in 2025
– Further reduction to 25% in 2026
– Exemption for businesses with annual revenue below ₦50 million
Oyedele reassured state governors that the Tax Bills currently before the National Assembly would ultimately increase their revenue, despite concerns that they might experience short-term losses.
He pointed out that approximately 85% of major tax revenues—including Personal Income Tax, Property Tax, Land Tax, and Value Added Tax—are primarily collected by states. However, he lamented that many state governments have been hesitant to implement Property Tax, despite its potential to generate significant income.
“Personal Income Tax in Nigeria contributes only about 10% of total tax revenue, whereas globally, the average is around 30%,” he observed.
Revenue Sources and Wealth Taxation
Oyedele identified three key revenue sources shared between the federal, state, and local governments:
– Corporate Income Tax
– Customs Duties
– Petroleum and Solid Minerals Revenue
He defended the proposed exemption for low-income earners, arguing that wealthier individuals should bear more tax responsibility. Citing South Africa as an example, he noted that just 1% of the population contributes over 90% of total Personal Income Tax revenue.
“The impact of the proposed tax reforms will include economic growth, increased competitiveness, shared prosperity, and improved revenue mobilization,” he stated.
Expected Impact of Tax Reforms
For Businesses:
– Lower tax burden
– Tax payment in Naira
– Refund of input VAT credit
For Households:
– More disposable income for low-income earners
– Tax waivers on essential foods
– Tax suspension on fuel
For Government:
– Macroeconomic stability
– Higher revenue generation
– Increased foreign and domestic investment
– Better international credit ratings
Governors’ Concerns Over Personal Income Tax
Meanwhile, Paul Alaje, CEO of SPM, highlighted the concerns of state governors regarding the proposed Tax Bills, particularly the fear that Personal Income Tax revenues would decline.
“Governors worry that since the new law seeks to exempt low-income earners from taxation, a large percentage of state government workers—who fall into this category—will no longer pay taxes,” Alaje explained.
Despite these concerns, Oyedele maintained that state governments would ultimately benefit, as the reforms would stimulate business expansion, create jobs, and drive long-term revenue growth.
