
The Nigerian federal government has proposed an increase in personal income tax for wealthy individuals to 25%.
This initiative, as articulated by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, is part of the broader Economic Stabilization Bill currently under review by the National Assembly.
The proposal specifically targets individuals earning over N1.5 million annually.
The proposed tax hike is a strategic effort to address Nigeria's substantial tax gap, where only 17% of Nigerians and 30% of businesses currently fulfill their tax obligations.
This low compliance rate is largely attributed to a pervasive lack of trust in government systems. By increasing the tax rate for high earners, the government aims to enhance its revenue streams significantly.
Oyedele highlighted that the current tax gap stands at approximately 70-75%. He emphasized the potential for revenue to quadruple if compliance issues are effectively addressed. To facilitate this, the government plans to introduce a National portal akin to South Africa's system, which would streamline and increase transparency in tax payments.
The government's approach also includes addressing policy gaps, such as unnecessary waivers granted to undeserving entities, which further exacerbate compliance challenges.
The recent publication of the Deduction of Tax at Source (Withholding) Regulations, 2024, marks a step towards tightening fiscal policies.
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