In a bid to bolster economic inclusivity and support small businesses, the Federal Government of Nigeria has proposed new tax reforms aimed at legally exempting 95% of businesses and individuals operating in the informal sector from paying any tax. The disclosure was made by Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, during a meeting with journalists in Abuja over the weekend.
Oyedele highlighted the committee’s data-driven approach, which led to the conclusion that the informal sector primarily comprises individuals striving to earn a legitimate livelihood. As such, the proposed reforms advocate for exempting 95% of this sector from various taxes, including withholding tax, company income tax, and payroll taxes.
Furthermore, Oyedele emphasized a shift in focus towards ensuring tax compliance among government officials and the elite. This signifies a concerted effort to promote equity and fairness in the tax system, with a particular emphasis on targeting those with the capacity to contribute more significantly.
Currently, the tax exemption threshold for companies stands at N25 million in annual earnings. However, Oyedele revealed plans to substantially increase this threshold to account for inflation and provide greater support to small businesses and low-income earners.
In his statement, Oyedele clarified that individuals and businesses earning N25 million or less annually are already exempt from company income tax and are not liable for value-added tax (VAT). The proposed reforms seek to formalize and expand upon these existing exemptions, ensuring that small businesses and individuals in the informal sector are not burdened with unnecessary tax obligations.
