Low-income earners are set to benefit from the new tax laws signed by President Bola Ahmed Tinubu on Thursday.

The president signed four bills into law, which include: the Nigeria Tax Bill 2024, the Nigeria Tax Administration Bill 2024, the Nigeria Revenue Service (Establishment) Bill 2024, and the Joint Revenue Board of Nigeria (Establishment) Bill 2024.

Incidentally, the new law, which will take effect in January 2026, will see salary earners who receive N1.3 milliion annually or below exempted from paying income tax. In other words, if you earn N108,000 or below, your income will not be taxed. This move, analysts say, can help to encourage saving and investment in Africa’s most populous nation.

Hence more than one-thirds of workers in both the private and public sectors will be exempted completely from Pay As You Earn (PAYE), which “requires employers to deduct income tax—and in some cases the employee portion of social insurance benefit taxes—from each paycheck delivered to employees as a form of advance payment on taxes due,” according to Investopedia.

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“This particular provision will enable people to increase their disposable income. It is only when your disposable income increases that you can save and invest. This kind of arrangement can boost capital formation in a nation,” said an economist, Mr Kalu Uka Kalu.

Disposable Income is “the money that is available from an individual’s salary after he/she pays local, state, and federal taxes,” said Investopedia.

A large of number of Nigeria’s low-income earners are in micro, small and medium enterprises (MSMEs), which number about 39 million in the nation.

The tax reforms prescribe that if you run a small business with a N50 million turnover or your fixed assets do not exceed N250 million, you will be exempted from paying the company income tax. You will also enjoy zero withholding tax on your business revenue.

“They will not have to pay personal income tax. Small businesses, over 90 per cent of small and micro, nano businesses, will no longer have to worry about paying corporate income tax or charging VAT or even deducting withholding tax or paying PAYE for their employees,” said Chairman of the Presidential Fiscal Policy and Tax Reforms, Mr Taiwo Oyedele on June 27.

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Mr Oyedele further said, “Any traces of VAT in food, in education, in medical and health care are now removed completely, so we should see prices of those items come down.”

Other benefits of the reforms include: VAT exemption on transportation, renewable energy, CNG, baby products, sanitary towels, rent and fuel products.

Similarly, if you are a farmer or manufacturer in the business of dairy, livestock, forestry, animal feed, and cocoa processing, you will get five-year tax holiday in line with the tax reforms. Again, if you are purchasing or hiring agricultural machinery or equipment, you will not pay the value added tax (VAT).

Also, there will be no VAT on lands, sale of real estate, and rent is exempted from VAT. There is an exemption on stamp duties for rents below N10 million a month. Capital gains tax is also exempted on the sale of dwelling houses. In fact, Oyedele claims that there will be more money in the hands of low-income earners to redistribute income and improve the well-being of the people.

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“Provisions have been made to help us improve efficiency in how we collect taxes, and also efficiency in the transparency of reporting the taxes we collect, which we expect should then be linked to how those taxes are utilised for the purpose of the people.”

Economy Post reported that Mr Tinubu had claimed that his administration’s most impactful achievement is the tax reform agenda. Mr Tinubu said these reforms were designed to reduce the cost of living, promote economic justice, and build a business-friendly economy that could attract investment and support every Nigerian. “Together, we are creating a system where prosperity is shared, and no one is left behind.”