In Nigeria, the Federal government is considering imposing a 25 per cent effective tax rate on the nation’s richest people. It has proposed that individuals earning N100 million and above monthly should start paying this rate, Nairametrics reports.
Taiwo Oyedele - Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms - announced the proposal at a breakout session during the NESG’s Nigeria Economic Summit.
Mr Oyedele reportedly said that the 25 per cent effective tax on the rich was needed to strike a balance which eases the tax burden on low-income earners and ensures that higher-income individuals contribute more to government revenue.
According to Mr Oyedele, the government expects the effective tax rate for rich Nigerians to rise to 25 per cent. The chairman stated that no rich Nigerian pays up to 19 per cent in effective tax.
“If you earn N1.5 million or less your personal income tax bill will go down, of course at the lower end completely exempted but if you earn more than that amount you see it going up incrementally up to 25 per cent. Today if you earn up to N100 million a month nobody pays 19 per cent effective personal income tax rate. We are taking that up to 25 per cent for the rich people and that is because you need to balance the book,” he said.
It was reportedly unclear whether the chairman meant that the 25 per cent 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 was clear that the intention is for those who earn above N100 million to have an effective tax rate of 25 per cent. The current effective tax rate for Nigerians earning N100 million is around 18 per cent, Nairametrics’ analysis found.
Mr Oyedele also said that the federal government plans to give businesses back 100 per cent of the Value Added Tax (VAT) paid by them on assets and services. According to the chairman, businesses paying VAT on assets such as cars, laptops etc., increases their overall cost which contributes to inflation.
It is reportedly 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.
Nigeria operates a PAYE system where tax rates increase with income levels. Under this system, taxpayers first receive a N200,000 plus 20 per cent tax-free allowance on their gross annual income, after which taxes are levied on a sliding scale.
This structure results in an effective tax rate that is reportedly lower than the highest marginal rate of 24 per cent. Currently, Nigerians earning over N100 million annually pay an effective tax rate of around 18 per cent
However, a proposed adjustment to the tax system seems intended to increase the effective tax rate for high-income earners to 25 per cent, ensuring a more substantial contribution from Nigeria’s most wealthy.
Source: Nairametrics
(Quote via original reporting)
In Nigeria, the Federal government is considering imposing a 25 per cent effective tax rate on the nation’s richest people. It has proposed that individuals earning N100 million and above monthly should start paying this rate, Nairametrics reports.
Taiwo Oyedele - Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms - announced the proposal at a breakout session during the NESG’s Nigeria Economic Summit.
Mr Oyedele reportedly said that the 25 per cent effective tax on the rich was needed to strike a balance which eases the tax burden on low-income earners and ensures that higher-income individuals contribute more to government revenue.
According to Mr Oyedele, the government expects the effective tax rate for rich Nigerians to rise to 25 per cent. The chairman stated that no rich Nigerian pays up to 19 per cent in effective tax.
“If you earn N1.5 million or less your personal income tax bill will go down, of course at the lower end completely exempted but if you earn more than that amount you see it going up incrementally up to 25 per cent. Today if you earn up to N100 million a month nobody pays 19 per cent effective personal income tax rate. We are taking that up to 25 per cent for the rich people and that is because you need to balance the book,” he said.
It was reportedly unclear whether the chairman meant that the 25 per cent 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 was clear that the intention is for those who earn above N100 million to have an effective tax rate of 25 per cent. The current effective tax rate for Nigerians earning N100 million is around 18 per cent, Nairametrics’ analysis found.
Mr Oyedele also said that the federal government plans to give businesses back 100 per cent of the Value Added Tax (VAT) paid by them on assets and services. According to the chairman, businesses paying VAT on assets such as cars, laptops etc., increases their overall cost which contributes to inflation.
It is reportedly 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.
Nigeria operates a PAYE system where tax rates increase with income levels. Under this system, taxpayers first receive a N200,000 plus 20 per cent tax-free allowance on their gross annual income, after which taxes are levied on a sliding scale.
This structure results in an effective tax rate that is reportedly lower than the highest marginal rate of 24 per cent. Currently, Nigerians earning over N100 million annually pay an effective tax rate of around 18 per cent
However, a proposed adjustment to the tax system seems intended to increase the effective tax rate for high-income earners to 25 per cent, ensuring a more substantial contribution from Nigeria’s most wealthy.
Source: Nairametrics
(Quote via original reporting)