In a significant move that could benefit millions of Nigerians, Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reform Committee, has announced that individuals earning the national minimum wage will be exempt from the Pay As You Earn (PAYE) tax. This is part of the new Tax Reform Bills, which aim to provide relief to low-income earners and simplify the country’s tax system.
The Tax Reform Bills, which are currently under consideration in the National Assembly, have already generated widespread interest and debate across the country. The reform aims to provide a fairer tax structure and reduce the financial burden on workers, particularly those at the bottom of the income ladder.
A Positive Step for Low-Income Earners
In a statement on Monday, Oyedele revealed that under the proposed tax law, Nigerians earning N70,000— the current national minimum wage— or slightly above, will no longer pay PAYE tax. This follows President Bola Tinubu’s approval of the new national minimum wage earlier this year, which saw the wage rise from N30,000 to N70,000.
“We are ensuring that the lowest earners will not have to pay taxes,” Oyedele said. “Individuals earning about N1.7 million or less per month will pay lower PAYE tax, while those earning the new minimum wage and slightly more will be fully exempted.”
A New Era of Taxation for Nigerians
The new law also proposes significant changes for other low and middle-income earners. Under the reform, around 98% of workers—both in the public and private sectors—are expected to pay lower taxes. Only the top 2% of earners will see a slight increase in their tax rate, up to 25% for high net-worth individuals.
The tax overhaul also aims to address what Oyedele called “fiscal drag,” where high inflation and outdated tax bands have pushed many low-income earners into higher tax brackets. “The current tax structure, introduced in 2011, has failed to keep pace with inflation, leading to unfair taxation,” he said.
By reviewing income bands and rates, the reform will ensure that workers—especially those with basic education—will be able to file their tax returns without needing professional assistance.
Focusing on Tax Relief for the Poor
One of the main objectives of the reform is to reduce the tax burden on low-income earners, aligning with the government’s philosophy of not taxing poverty. According to Oyedele, around one-third of all workers in Nigeria will be fully exempt from tax under the proposed law. This will provide relief to many who have struggled with Nigeria’s tax system for years.
“Low and middle-income earners will pay less, and this is a move to ensure that the burden of taxes does not fall on those who are struggling the most,” Oyedele explained.
Additionally, self-employed individuals and entrepreneurs will benefit from the same tax exemptions available to those in formal employment, a move that is expected to encourage economic participation across various sectors.
The VAT Reform and Cost of Living
As part of the broader tax reforms, there will also be changes to the Value Added Tax (VAT) system. Oyedele revealed that food, education, health, rent, and public transportation will be exempt from VAT or taxed at a zero rate. This reform is expected to ease the burden on low-income households, as these items make up the majority of their consumption.
“Food, education, health, and transport are essential for everyday life, and removing VAT from these items will directly benefit Nigerian families,” he stated.
The changes to VAT are particularly important for those in lower-income brackets, who typically spend a larger portion of their income on these essential items.
Remote Work and the Digital Economy
Another key element of the proposed reforms is the focus on remote work. Oyedele emphasized that the new tax laws would support Nigeria’s growing digital economy by providing tax incentives for remote work. This could open up new opportunities for Nigerian youths to participate in the global business process outsourcing (BPO) industry, he said.
“This will empower Nigerian youths to contribute to the digital economy, creating more jobs and boosting economic growth,” Oyedele explained.
