The Federal Government has disclosed it would exempt minimum wage earners from paying personal income tax, in order to stimulate the economy and improve the standard of living of minimum wage earners.
This is also in line with fulfilling promises made by the President Buhari’s administration to reduce the cost of transportation and the impact of inflation on ordinary Nigerians.
The FG stated this while disclosing the proposed exemption via the official Twitter handle of the Presidency.
The planned exemption of minimum wage earners from paying personal income tax is contained in the 3rd schedule of the Finance Bill, 2021, which seeks to support the implementation of the 2021 budget by proposing key reforms to specific taxation, customs, excise, fiscal and other laws.
The Finance bill was approved at a meeting of the Federal Executive Council (FEC) presided over by the President on Wednesday, November 18, 2020; and recently sent to the House of Representatives for consideration and passage by President Muhammadu Buhari.
What they are saying
President Muhammadu Buhari stated that:
“The new provision to exempt minimum wage earners from paying income tax, would complement the tax breaks allowed to small businesses last year, to further stimulate the economy.”
Mr. Taiwo Oyedele, the Fiscal Policy Partner and West Africa Tax Leader at PWC, discussed “Addressing the Finance Bill 2021” during the Regulatory Outlook for the Nigerian economy in 2021, a webinar session organized by Nairametrics. He welcomed the decision to exempt minimum wage earners from paying income tax, and said:
“I hope the country would, in the near future, extend this exemption to people that earn about N100, 000 per month. A country cannot become rich by taxing poverty. The money is with the people who are making money; and you have to be fair in administering taxes by asking people to pay according to their ability.
“In South Africa, people that earn about N150,000 per month are exempted from paying income tax. Despite this exemption, South Africa still generates more from personal income tax than the entire Federal Government generated revenues and all the taxes of the thirty-six (36) states combined, even though the population of the country is only about a quarter of Nigeria’s population.”
What you should know
The Finance bill may be cited as the Finance Bill 2021.
The proposal to exempt minimum wage earners from paying personal income tax is contained in the 3rd schedule of the Finance Bill 2021.
The Trade Union Congress (TUC) stated on the 23rd of September that eight (8) states are yet to commence the payment of N30,000 minimum wage.
The provisions of the Finance Bill 2021 shall take effect from January 2021 or at a date that shall be indicated by the National Assembly by law (or by Mr. President by order published in the official Gazette).
The bill is considered very critical to the implementation of the 2021 budget, according to the Minister of Finance, Budget and National Planning.