The federal government, through the Presidential Committee on Fiscal Policy and Tax Reforms has announced plans to remove taxes on food, house rents, public transportation services in the country.
Taiwo Oyedele, chairman of the committee disclosed this during an interview on channels television. According to him, the policy is aimed to make basic necessities affordable to Nigerians.
“What we found was that the VAT, not just the tax system, even the VAT system was placing too much burden on the poorest people. For example, you had food items. Some of them were exempt.
“And without sounding technical, when you say an item is exempt from VAT, it means that any VAT you incur before the final stage, you have to bear it. Whereas if you say it’s zero rated, all VAT from the beginning of that process to the end is taken out. So we’ve decided that food should not just be exempt, it should be zero rated.
“What we have taken into account is what are those basic necessities of life—food, accommodations, that is if you do not have a house of your own, transportation, education and health. We’ve deliberately identified those items. And we’ve removed completely, almost all the taxes applicable to them, including no VAT.
“We have also developed some proposals where government can give relief to private sector employers who provide transportation relief to their workers. Also, we’ve had a proposal around more employment, so if an employer employs more people than they normally do, maybe the average of the past three years, they get some relief, so that’s meant to stimulate employment generation.
“So we think that from the fiscal policy and tax perspective, we can make it at least more affordable for the Nigerian people to be able to afford those basic necessities. Shared passenger transportation is completely tax-free, but if you hire a taxi, so we assume that you’re not the poorest Nigerian, then you have to pay tax, whereas if you get into a bus, like people in Lagos getting into Danfo and Molwe, you know, that would be completely tax-free. So that’s what we’ve done so far regarding that particular issue,” he said.
Oyedele speaking further, said that the committee has recommended the exemption of small businesses from tax payments including withholding taxes, company income tax, adding that their employees have also been exempted from personal income tax.
He explained that businesses regarded as small business have been reviewed to businesses with a N50 million annual turnover. “So if your turnover is 50 million or less, then you don’t have to worry about all these taxes. And that from our analysis will cover around 97% of small businesses.
He also disclosed plans to introduce 2.5 percent increase in tax, from 7.5 percent to 10 percent by 2025.
“The law we are proposing to the National Assembly has the rate of 7.5 percent moving to 10 percent from 2025. We don’t know how soon they will be able to pass the law. Then subsequent increases are also indicated in terms of the year they will kick in.
“While we are doing that, we have a corresponding reduction in personal income tax. Anybody that is earning about N1.5 million a month or less, they will see their personal income tax come down. Companies will have income tax rate come down by 30 percent over the next two years to 25 percent. That is a significant reduction.
“Other taxes they pay are quite many: IT levy, education tax, etc. All these we are consolidating into a single one. They will pay 4 percent initially. That will go down to 2 in the next few years. corresponding reduction in personal income tax.
