Tax Reforms: Stop Taxing Poverty and Capital, Focus on Profits – Oyedele

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The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, criticized Nigeria’s tax framework.

He described it as unfavorable to economic growth, disproportionately taxing the poor and capital rather than business profits.

Speaking at the 2025 Finance Correspondents Association of Nigeria (FICAN) AGM, Oyedele stressed the need for reforms.

He emphasized Nigeria’s multiple taxes and agencies impose burdens, causing frustration and widespread business closures nationwide.

“An effective tax system promotes business growth before taxing profits, as practiced in developed economies,” Oyedele stated.

Key Proposed Tax Reforms
The proposed reforms seek to simplify Nigeria’s tax structure, support business growth, and increase government revenue.

Progressive Personal Income Tax (PIT) Structure:

Earnings up to ₦800,000: Exempted

Next ₦2.2 million: 15%
Following ₦9 million: 18%
Next ₦13 million: 21%
Next ₦25 million: 23%
Incomes above ₦50 million: 25%
Corporate Tax Adjustments:
Reduction from 30% to 27.5% in 2025.
Further reduction to 25% in 2026.

Exemption for businesses earning below ₦50 million annually.
Oyedele assured governors the reforms would improve revenue despite initial fears of potential financial losses.

He noted that 85% of major tax revenues are collected at the state level across multiple tax categories.

Challenges with State Tax Implementation
Oyedele lamented state governments’ reluctance to implement Property Tax, which holds massive income-generating potential.
He pointed out Nigeria’s Personal Income Tax contributes only 10% of total revenue, unlike 30% globally.

“Globally, Personal Income Tax forms significant revenue, but Nigeria still lags considerably in this aspect,” he stated.

Addressing Income Disparities Through Taxation
Oyedele defended exempting low-income earners while imposing higher taxes on the wealthy to balance economic inequality.
He cited South Africa, where 1% of the population contributes over 90% of total Personal Income Tax revenue.

“Exempting the poor while taxing the wealthy leads to growth, competitiveness, and shared prosperity,” Oyedele explained.

Impact of the Proposed Reforms
For Businesses:
Lower tax burdens to encourage sustainable growth and expansion.
Tax payments made in Naira to ease compliance processes.
Refunds for input VAT credits to boost operational liquidity.

For Households:
More disposable income for low-income earners, promoting consumer spending.
Tax waivers on essential foods to reduce living costs.
Suspension of fuel taxes, lowering transportation and energy expenses.

For Government:
Macroeconomic stability ensuring steady and predictable growth patterns.
Higher revenue generation to fund critical infrastructure and services.
Improved credit ratings attracting foreign and domestic investments.

Governors Raise Concerns Over PIT Revenue
Some governors expressed concerns about potential revenue declines from Personal Income Tax exemptions.
Paul Alaje, CEO of SPM, said governors worry about exempting low-income government workers from taxation.

“Exempting low-income earners could reduce revenues, which worries many governors,” Alaje explained during discussions.

However, Oyedele reassured state leaders that economic growth would offset potential revenue losses over time.

“Business expansion will generate more jobs and increase revenues for state governments eventually,” he concluded.