The Chairman of the Presidential Advisory Committee on Fiscal Policy and Tax Reform, Mr. Taiwo Oyedele, has clarified that under the proposed Tax Amendment Bills, individuals earning up to ₦1.7 million annually (approximately ₦141,000 per month) will pay lower Pay As You Earn (PAYE) tax. Workers earning the new minimum wage and slightly above it will also be exempt from paying taxes.

Speaking on X (formerly Twitter), Oyedele explained that over 90% of workers in both the public and private sectors will pay reduced taxes under the proposed framework. High-income earners, however, will see a progressive increase, with ultra-high-net-worth individuals taxed at rates up to 25%.

He addressed concerns over potential tax increases under the reforms, stating that the current tax table, introduced in 2011, has become regressive. Inflation and the lack of a review have caused fiscal drag, pushing many low-income earners into the highest tax brackets.

For instance, individuals earning ₦400,000 per month currently pay the same top marginal tax rate as those earning ₦20 million monthly. “The proposed changes aim to restore progressivity, where higher earners pay more,” Oyedele noted.

Under the reforms, workers will also benefit from enhanced reliefs. In addition to the existing ₦800,000 annual tax exemption, rent relief of up to ₦200,000 per annum will exempt individuals earning up to ₦1 million annually (about ₦83,000 monthly) from taxes.

Oyedele highlighted that the proposed system avoids the pitfalls of the current regime, where small income increases result in disproportionate tax burdens. “For example, under the current system, someone earning ₦30,001 per month pays more tax than someone earning ₦30,000, leaving them worse off. The new framework addresses this by ensuring everyone benefits from the tax-free band,” he explained.

He also clarified that statutory deductions, such as pensions and contributions to the National Housing Fund, would remain intact under the new tax framework. Reliefs such as those for annuities, life insurance premiums, and interest on owner-occupied home loans would also continue.

While acknowledging that the removal of Consolidated Relief Allowance (CRA) and personal relief might appear as a drawback, Oyedele stressed that these have been integrated into the tax bands. This simplifies the system and reduces the effective tax rate for most workers, particularly low- and middle-income earners.

Addressing concerns about the seemingly steep 15% tax rate for the second band, Oyedele explained that this is lower than the 21% marginal rate currently applied, even after reliefs. The new tax table will result in lower effective rates for most workers, particularly those earning up to ₦3 million annually.