The Federal government is looking at imposing a 25% effective tax rate on rich Nigerians proposing that individuals earning N100 million and above monthly in the country should start paying this rate.
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.
Oyedele explained that the 25% effective 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.
According to Taiwo Oyedele, the government expects the effective tax rate for rich Nigerians to rise to 25% stating that no rich Nigerian pays up to 19% in effective tax rate.
It is unclear if he meant that the 25% effective rate should be paid by Nigerians earning above N1.5 million or if this is the highest tax band rate being proposed for those that fall into this tax bracket.
However, it is clear the intention is for those who earn above N100 million to have an effective tax rate of 25%. The current effective tax rate for Nigerians earning N100 million is around 18% according to Naijaonpoint analysis.
He also stated the federal government plans to pay back to businesses 100% of the Value Added Tax (VAT) paid by them on assets and services.
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.
Nigeria operates a progressive personal income tax system, often referred to as “Pay As You Earn” (PAYE), where tax rates increase with income levels.
Note: This article was updated to capture the word “effective” which is what was used by Taiwo Oyedele in his remarks.