Should the Presidential Fiscal Policy and Tax Reforms Committee (PFPTRC) has its way, 95 per cent of the informal sector operators would be exempted from all taxes.
The proposal, made by the Taiwo Oyedele-led panel, is to alleviate the burden of multiple taxations on small businesses and low-income individuals.
Oyedele dropped at the end of the close-out retreat of the PFPTRC in Abuja at the weekend.
According to him, the informal sector is populated by citizens working hard to earn a legitimate living, adding that the in the view of the committee, people in this category should not be over-burdened with taxation.
He said they should be supported to grow economically to a point where they can fit into the more affluent categories before imposing taxes on them.
He further explained that a lot had been put into consideration to have come to the recommendation, noting that those who earn between ₦25 million and less per annum, should be exempted from paying all forms of taxes, including income and value added tax (VAT).
Oyedele said: “Everybody, even if you’re not a business person, feels the impact of multiple taxations almost everywhere you turn.
“It affects small businesses even more than large businesses, and the poor and vulnerable population are having to deal with it.
“So we’re using data to inform our decisions, currently if you earn N25 million a year or less, you don’t have to pay company income tax, you don’t have to worry about VAT.
“We’re looking at increasing that significantly, first to recognize the inflation we’ve had to contend with over the past few years and also because we think that this whole idea and concept of ‘your money is in the informal sector’ is not supported by data.
“We think that the informal sector are people who are trying to earn legitimate living, we should allow them be and support them to grow to a point where they can then have the ability to pay taxes. So we think that 95% of the informal sector should be legally exempted from all taxes; withholding tax, company income tax, even payee on their staff, let them be.
“We can then focus our attention on top 5% of that sector and of course, the middle class and the elites. We think that the days of being above the law in paying taxes are over.
“The same thing we’re saying to our leaders, whether they are elected or appointed, we think they have to lead by example by showing that they have paid the taxes, not only on time, but correctly to the lawful authorities as contained in the various laws.”
According to him, the committee’s proposal for tax reforms is expected to be submitted to the National Assembly by the third quarter of the year.
Oyedele said that the committee has concluded the proposal phase and is currently consulting with the private sector, with internal approvals expected by the end of next month.
He said that some executive orders and regulations, including a new withholding tax regulation exempting small businesses, are ready for implementation and await the minister’s signature.
The reform panel chair list the new National Tax Policy, Spending Policy, and Borrowing Policy would be introduced before the end of the year, while Constitutional amendments are expected in 2025 and 2026, aligning with the National Assembly’s two-year timeline.
He said: “We just closed out now on the proposal phase, we’re already consulting with the private sector. That consultation we expect will continue for the rest of this month and then the internal approvals (whether FEC or NEC, any other organ of government, up until the end of June.
He said: “We envisage by the Quarter Three, our documents will be ready to go to the National Assembly and by the end of that Q3, we should have them enacted into law, so we can give reasonable notice to the public, businesses, individuals before commencement for many of them kick off in 2025.
“But where we have executive orders, directive regulations that don’t require enactment into law, like we have a new withholding tax regulation, where small businesses will be exempt from having to deduct withholding tax, that based on the existing law today, you don’t need to enact it into law, we just need the Minister to sign. So it’s ready, we’re waiting for the final signature.
“We also have a new National Tax Policy that communicates this direction of our tax system, how we’re going to be spending our money, we have a Spending Policy now, as well as Borrowing Policy so that the social contract with the people is delivered to them in a meaningful way.
“So, all of that will happen before the end of the year, but where we are enacting the law and proposals to amend the Constitution, will happen in 2025, and maybe 2026, in the case of the Constitution because I think the timeline that the National Assembly has is about two years.”
He said the administration is reforming the country’s tax system with the aim to reducing the burden of multiple taxation on small businesses and low-income individuals.
Oyedele said that despite numerous taxes, the country’s tax collection as a percentage of GDP remains low and to address this, the government intends to repeal many taxes, harmonise the remaining ones, and improve tax collection efficiency.
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