The Federal government is looking at imposing a 25% tax rate on individuals earning N100 million and above monthly in the country.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele stated this at a breakout session during the Nigeria Economic Summit organised by the NESG.
He also noted that those who earn over N100 million monthly that is the rich should pay a 25% tax.
Oyedele explained that the 25% tax on the rich was needed to strike a balance that eases the tax burden on low-income earners while ensuring that higher-income individuals contribute more to government revenue.
He also stated the federal government plans paying back to businesses 100% of the Value Added Tax (VAT) paid by them on asset and services.
According to him, businesses paying VAT on assets such as cars, laptops etc increases their overall cost which contributes to inflation.
He said, “If you earn N100 million a month, we’re taking up to 25 percent from the rich people. That’s because we need to balance the books.”
“Today, whatever VAT you (businesses) pay on assets—whether you’re building a factory, buying a laptop, or vehicles—you bear it. This increases your cost, and therefore, your pricing will go up. Once our reforms are implemented, you get the credit back 100 percent on services and assets.”
It is expected that this proposal would enable companies to deduct the VAT paid on goods and services used in production from their tax liabilities, potentially alleviating cash flow challenges and boosting economic activity.
Recent tax reforms proposals and changes
The Taiwo Oyedele Chaired committee has proposed a range of fiscal measures aimed at increasing government revenues while alleviating the tax burden on businesses and stimulating economic activities.
Some of their proposals and approved changes so far include; a new withholding tax regime which exempts manufacturers and small businesses from paying withholding tax, proposal exclude food and transport from taxes, introduction of Tax ID for bankers and the who work in the financial services sector etc.
Currently, the committee has sent ten new bills to the National Assembly on constitutional changes to the nation’s tax laws.
The committee pointed out that some of the identified issues require legislative amendments, rather than just executive orders.
Tax burden of Nigerian businesses
Businesses in Nigeria bear a high tax burden to the plague of multiple taxation prevalent across the country.
According to the tax committee, there are 60 official taxes and levies being collected by the three tiers of government from individuals and corporates. However, the unofficial taxes numbers up to 200 collected from individuals and businesses.
This creates an unhealthy business climate for investment and discourages expansion. It also contributes to high cost of production and inflation across the country.
President Tinubu had earlier noted that his administration will “tax the fruits and not the seeds” of businesses in the country.
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