The Federal Government has clarified how low-income earners will pay zero personal income tax under the new tax regime that took effect on January 1, dismissing claims that the policy targets the poor.
In a statement issued on Tuesday, the Director-General of the Budget Office of the Federation, Tanimu Yakubu, said criticisms of the policy were based on “wrong notions, stage-managed arithmetic, selective accounting and misrepresentation of the law.”
Yakubu said a major omission in the criticism was the ₦800,000 annual tax-free threshold, noting that the first ₦800,000 of annual income now attracts a zero per cent tax rate—unlike the previous structure that pushed low-income earners into higher tax brackets.
Using the example of a worker earning ₦75,000 monthly, Yakubu explained that such an individual earns ₦900,000 annually, meaning only ₦100,000 falls above the zero-rated threshold.
“Under a system where the first ₦800,000 is taxed at 0 per cent, the portion potentially exposed to tax is just ₦100,000 per year,” he said.
He added that even if the excess ₦100,000 is taxed at 15 per cent, the total annual tax liability would amount to ₦15,000, or ₦1,250 monthly, before deductions.
According to Yakubu, statutory deductions such as pension contributions further reduce taxable income. With an 8 per cent pension contribution of ₦72,000 annually, the taxable income above the threshold drops to ₦28,000, translating to ₦4,200 per year, or ₦350 monthly, in tax.
He said when other allowable deductions, including health insurance contributions, are applied, the taxable income could fall below ₦800,000, effectively reducing personal income tax to zero.
“A deduction is not a tax, and a contribution you own is not a levy you lose,” Yakubu said, stressing that pension and health insurance payments are designed to protect workers’ welfare while reducing taxable income.
Yakubu described claims that the poor would inevitably be taxed under the new regime as misleading, arguing that such conclusions were built on “stage-managed arithmetic” rather than the actual provisions of the law.
He also faulted the use of global poverty benchmarks in criticising the policy, explaining that the World Bank’s $4.20-a-day poverty line is based on purchasing power parity and cannot be directly converted to naira using market exchange rates.
Addressing concerns that widening the tax base meant taxing the poor, Yakubu described the argument as a false syllogism, noting that tax base expansion could involve capturing non-compliant high earners, closing loopholes, strengthening employer withholding, and bringing affluent segments of the digital and informal economy into the tax net.
While acknowledging concerns about corruption and mismanagement, he said they did not invalidate a tax structure designed to reduce Nigeria’s dependence on borrowing and improve its weak tax-to-GDP ratio.
“The outrage depends on omitting the very thresholds and concepts that make its conclusion collapse,” Yakubu said. “The new tax structure explicitly protects low incomes, and claims to the contrary are driven more by narrative devices than by arithmetic grounded in law.”
He added that branding the policy as “Bola’s tax” deliberately ignored safeguards built into the framework to shield low-income earners.
Yakubu also described an essay by Emmanuel Orjih criticising the policy as relying on emotional framing and selective accounting rather than the approved tax schedule, noting that a key source of misinformation was the misclassification of pension and health insurance contributions as taxes.
“Pension payments are deferred wages owned by workers and lodged in their Retirement Savings Accounts, while health insurance premiums are payments for defined coverage, not compulsory levies for general government spending,” he explained.
