Tinubu’s Tax Bills Aim To Ease Burden On 90% Of Nigerian Workers: Presidential Committee Chairman

The tax bills proposed by President Bola Tinubu were designed to reduce the tax burden on 90% of Nigerian workers, Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, said Wednesday.

During a plenary session, Oyedele said the bills were aimed at reviewing the VAT sharing formula, ensuring that states received a fair share based on what was consumed within their territory.

He explained that if the tax reform proposals were approved by the Senate, they would exempt more than 30% of citizens who earn the minimum wage, which was around 50,000 to 70,000 Naira, Premium Times reported.

He also pointed out that workers earning above 70,000 Naira monthly will still be required to pay taxes. Those earning 100 million Naira per month will pay 25% of their income as tax. The remaining 10% of higher earners will pay slightly more.

The top tax rate is currently 24%, and the proposal is to increase it to 25%. Oyedele added that this system was more favorable, compared to other countries. For example, in South Africa, earners would pay 41%, in Kenya 35%, and in the U.K. or U.S., close to 40%.

Oyedele explained that if the proposed tax bills were approved, each state would receive credit for the consumption of goods within its territory. However, he warned that this would result in states collecting less than half of what they currently get, which could lead to businesses struggling.

For example, businesses that buy goods in Kaduna and sell them in the FCT won't be able to claim input tax, causing costs to rise and making it harder for businesses to succeed. He also noted that in the U.S., states collect sales tax, but they cannot collect tax on imports or international services, as that is the federal government's responsibility.

If states in Nigeria start collecting VAT, they would not be able to collect VAT on imports, which make up about half of the total VAT collected in Nigeria. According to Oyedele, if anyone would benefit from this, it would be the federal government.

Oyedele explained that each state will receive credit for the economic activities within its jurisdiction. He believed that once this adjustment was made, states should be allowed to keep more of the economic value generated within their areas.

This would be fair and would discourage any state from going to the Supreme Court to try and collect VAT on their own, which was not the goal. He added that the proposed VAT distribution would be as follows: 10% to the federal government, 55% to state governments, and 35% to local governments.

Furthermore, 60% of the amount allocated to states and local governments will be distributed, based on derivation, meaning according to where the economic activities are generated.

Oyedele mentioned that 5% of the total amount available for distribution will be set aside to ensure that no state receives less than what it would have under the previous VAT distribution formula from the 2004 VAT Act.

Last month, the federal government announced that key energy products and infrastructure, such as diesel, feed gas, liquefied petroleum gas, compressed natural gas, electric vehicles, liquefied natural gas infrastructure and clean cooking equipment, will no longer require VAT.