Contentious Tax Reforms: Taxing Poverty, Capital Won’t Drive Economic Growth – Oyedele

• Defends proposed exemption of low-income earners from tax net
• Addresses Govs, Stakeholders’ concerns

BY COBHAM NSA – The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, says Nigeria’s current tax system is unhealthy and incapable of driving the much-needed economic growth and development.

He explained that with the system disproportionately taxing the poor, capital and investments instead of focusing on profits, it cannot produce or support the economic outcomes which the government seriously seeks.

For Oyedele, the system is encumbered by multiplicity of taxes and taxing agencies, high corporate tax burden on businesses, and deployment of archaic laws and ambiguous provisions for its operations.

Addressing members of the Finance Correspondents Association of Nigeria (FICAN) at their 2025 Annual General Meeting (AGM) in Abuja over the weekend, Oyedele insisted on a tax system that will encourage business growth rather than stifling it due to numerous challenges.

In his presentation titled: “Tax Reform as a Pillar for Nigeria’s Economic Prosperity”, Oyedele said there is no denying the fact that; “The multiplicity of taxes and taxing agencies places an excessive burden on businesses, leading to frustration and closures across the country”.

He said in line with best global practices, an effective tax system is one that supports business expansion before taxing profits as deployed in developed economies.

The Committee Chairman offered more insight on the proposed tax reforms, saying they aim to consolidate multiple taxes and introduce a progressive Personal Income Tax (PIT) structure that covers: Exemption for earnings up to ₦800,000; 15% tax on the next ₦2.2 million; 18% tax on the following ₦9 million; 21% tax on the next ₦13 million; 23% tax on the next ₦25 million; and 25% tax on incomes above ₦50 million

Also, he stated that businesses will have corporate tax rates adjusted as follows: Reduction from 30% to 27.5% in 2025; Further reduction to 25% in 2026; and Exemption for businesses with annual revenue below ₦50 million

While addressing fears being expressed in certain quarters about the purported skewed nature of the reforms, as well as the likelihood of revenue losses or reduction in monthly earnings, Oyedele reassured State governors and other stakeholders that the Tax Bills, now before the National Assembly (NASS), will ultimately increase their revenue and make them happier.

Oyedele said the Committee is robustly canvassing a buy-in by all stakeholders, maintaining that State governments stand to benefit in the long run, as the reforms will drive business expansion, create jobs, and ultimately boost revenue collection across the States.

On misconceptions about existing revenue structure, he said available statistics indicate that approximately 85 percent of major tax revenues, including Personal Income Tax, Property Tax, Land Tax, and Value Added Tax (VAT), are primarily state-collected revenues.

The Committee Chairman further noted existing gaps in the nation’s tax system saying; “Personal Income Tax in Nigeria contributes only about 10 percent of total tax revenue, whereas globally, the average is around 30%”.

While identifying three key revenue sources shared between the federal, state, and local governments as: Corporate Income Tax, Customs Duties, Petroleum and Solid Minerals Revenue, Oyedele expressed concerns that many state governments are reluctant to implement Property Tax, despite its potential to generate significant income.

The Committee Chairman also defended the proposal to tax wealthy Nigerians while exempting low-income earners in the country, citing the South Africa’s example where just one percent (1%) of the population contributes over 90 percent of total Personal Income Tax (PIT) revenue to the country.

On derivable benefits from proposed tax reforms, he said; “The impact of the proposed tax reforms will include economic growth, increased competitiveness, shared prosperity, and improved revenue mobilization”.

According to him, businesses will enjoy Lower tax burden, Tax payment in Naira, and Refund of input Value Added Tax (VAT) credit.

Similarly, households will gain through through more disposable income for low-income earners; Tax waivers on essential foods; and Tax suspension on fuel.

On the part of Government, the new regime will ensure Macroeconomic stability, Higher revenue generation, Increased foreign and domestic investment, and Better international credit ratings.

Managing Governors’ Concerns

In his intervention at the Forum, Chief Executive Officer of SPM Professional, Mr Paul Alaje said many state governors are worried that with the proposed Tax Bills, revenues from Personal Income Tax (PIT) will decline in their respective domains.

He said; “Governors worry that since the new law seeks to exempt low-income earners from taxation, a large percentage of state government workers, who fall into this category, will no longer pay taxes”.

Alaje’s presentation, which centred on “Tax Reform as a Pillar for Economic Prosperity: the Necessities and Concerns”, also noted the general concerns generated by the proposed tax reform bills, hinting that the planned increase in VAT rates from 10% in 2025 to 12.5% in 2026 continues to heighten fears over growing inflation figures

Acknowledging that the new tax reform could Improve tax compliance by capturing new sectors, like the freelancing and self employed individuals, he expressed fears adjustments in VAT revenue sharing formula to allocate funds based on consumption, may favour economically robust southern states while potentially widening the economic gap in the less developed northern regions.

The SPM Chief cautioned that the development could intensify regional inequalities and fuel socio-economic tensions, even as he canvassed that the concerns should be addressed through comprehensive stakeholder consultations and phased implementation strategies.

For him, Government must embrace all-inclusive strategies to ensure the reforms achieve their intended economic benefits without unintended adverse effects on the country and Nigerians.