By Ajibola Olaide, JKNewsMedia Reporter
LOW-INCOME earners will not pay personal income tax under the new tax regime that took effect on January 1, the Federal Government has confirmed saying the clarification comes amid criticisms suggesting the reforms impose additional burdens on the poor.
Director-General of the Budget Office of the Federation, Tanimu Yakubu, said the claims were based on “stage-managed arithmetic, selective accounting, and misrepresentation of the law.”
He highlighted that the central feature of the new personal income tax structure is the zero per cent tax rate on the first N800,000 of annual income, a provision he said critics deliberately overlooked reiterating that only income above that threshold is taxable.
Yakubu illustrated the framework with an example explaining that a worker earning N75,000 monthly would have an annual income of N900,000, leaving N100,000 above the tax-free band.
At a 15 per cent rate on the excess, the worker’s gross tax exposure would be N15,000 annually, or N1,250 per month, before deductions.
He noted that statutory pension contributions further reduce the taxable portion. At an eight per cent contribution rate, N72,000 would be deducted annually, leaving just N28,000 subject to tax.
This equates to N4,200 per year or N350 per month with additional deductions such as health insurance, taxable income could fall entirely below the N800,000 threshold, resulting in zero personal income tax liability.
Yakubu emphasised that pension and health insurance contributions should not be misrepresented as taxes. He described pensions as deferred wages owned by workers and held in their Retirement Savings Accounts, while health insurance payments secure defined benefits.
He also criticised reliance on global poverty benchmarks in evaluating the reforms. Yakubu said the World Bank’s $4.20-a-day poverty line is a purchasing power parity measure, not a nominal wage threshold that can be converted directly into naira using market exchange rates.
Addressing concerns that expanding the tax base would target the poor, Yakubu called the argument misleading.
He explained that tax base expansion focuses on improving compliance among high earners, closing loopholes, capturing affluent segments of the digital and informal economy, and strengthening employer withholding systems.
Yakubu acknowledged that governance and accountability issues are legitimate but said they did not invalidate the structure of the tax schedule, which aims to reduce Nigeria’s reliance on borrowing and improve the historically weak tax-to-GDP ratio.
He criticised narratives branding the reform as a policy designed to tax subsistence incomes, stressing that clear legal thresholds protect low-income earners. Yakubu described such claims as driven by emotive framing rather than facts grounded in law.
