How tax reform will boost workers’ welfare – FG
The proposed Tax Reform Bills are set to significantly enhance the quality of life for workers, as reaffirmed by the Federal Government. In response to concerns raised by the Nigeria Labour Congress (NLC), Joe Ajaero, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, and Taiwo Oyedele outlined key measures included in the bills.
One major provision is that workers earning around N1 million annually (approximately N83,000 monthly) will be fully exempt from the Pay As You Earn (PAYE) tax. This change will benefit nearly one-third of workers in both the public and private sectors. For middle-income earners, the bills propose reduced PAYE tax rates for those earning up to N20 million annually (about N1.7 million per month), thereby benefiting an additional 60 percent of Nigerian workers. Members of the armed forces actively engaged in combating insecurity will also receive PAYE tax exemptions along with other ranks.
To address the rising cost of living, the bills propose eliminating Value Added Tax (VAT) on essential goods and services, such as food, healthcare, and education, which account for about 60 percent of all household consumption. Other items, including transportation, renewable energy, compressed natural gas (CNG), baby products, sanitary towels, and fuel products—representing over 20 percent of household consumption—will also be exempted. Oyedele noted that these measures aim to cover nearly 82 percent of household expenses and up to 100 percent for low-income earners.
Additionally, the tax reform bills include provisions to incentivize better compensation for workers, such as tax breaks for wage awards and transport subsidies aimed at low-income earners. The bills also seek to simplify processes by removing bureaucratic restrictions on wage awards and introducing caps on taxable benefits given to workers.
The reforms propose VAT exemptions on rent and property acquisitions to promote affordable housing. Stamp duties on rents below N10 million will also be waived to reduce housing-related financial burdens.
Employment creation is another priority of the tax reforms, with incentives like tax benefits for employers who hire more workers, tax-friendly rules to attract remote work opportunities for Nigerians, and tax exemptions for 97 percent of Small and Medium Enterprises (SMEs). The harmonization and reduction of tax rates for large businesses are expected to stimulate growth, thereby creating more job opportunities.
While acknowledging that the tax bills could be further refined, Oyedele emphasized the importance of thorough debates and stakeholder engagements during the legislative process. He stated, “The bills in their current form are the most pro-worker tax reforms in Nigerian history,” and encouraged the NLC to collaborate in identifying areas for improvement.
“We believe the NLC will not intentionally work against the interests of its members. We look forward to discussing specific areas to better serve all Nigerians, including workers,” Oyedele added. Read More
