The Chairman of the Presidential Fiscal Policy and Tax Reform Committee, Taiwo Oyedele, has announced that at least nine out of every 10 Nigerians will no longer have to pay the Pay As You Earn tax.
According to BusinessDay, Oyedele, who spoke at the ongoing Nigerian Economic Summit in Abuja on Tuesday, said that about 98 per cent of Nigeria’s population will no longer pay the PAYE tax.
He added that Nigerians will start enjoying the benefits of new tax laws, beginning from January 2026.
PAYE is an acronym for “Pay as You Earn”. It is a method of collecting personal income tax from employees’ salaries and wages through deduction at source by an employer as provided by the relevant sections of the Personal Income Tax Act.
President Bola Tinubu, in June 2025, signed the four (4) Tax Reform Bills into law. These laws include the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Act, and the Joint Revenue Board Act.
The Acts comprehensively overhaul the Nigerian tax landscape to drive economic growth, increase revenue generation, improve the business environment, and enhance effective tax administration across the different levels of government. Oyedele emphasized that the new tax laws are not targeted at the low-income earners or those at the poverty line.
Oyedele detailed the immediate impact of the changes for salary earners, stating: “From January 2026, you will feel the impact. If you earn a salary, when you are paid your salary at the end of January 2026, for 97- 98 per cent of Nigerians, they will either no longer pay PAYE, or they’ll pay less PAYE.” He provided the specific figures: “That is about 33 percent of workers in the public and private sector combined, will no longer pay PAYE, because they will be exempted. The remaining 2 percent plus will pay more.”
He explained that the committee has established a poverty line which is determined through a household income and not individual earnings.
He explained the methodology based on national data, saying: “So if you look at the amount, you don’t know how many people depend on that amount. So we looked at the study that was done by the NBS, and the average household size in Nigeria is five. Based on the data on employment, gainfully employed people, you have a little over two out of the five who are employed.”
Based on this, the threshold was set: “We came up with a conclusion of between N100,000 and N120,000 a month. Two people would then earn around 230,000 to 240,000 to cater for five people so they don’t fall below the poverty line. Under the old laws, you earn 30,000 Naira a month, you’re paying tax. So this is significant improvement.”
Oyedele, speaking further, stressed that the laws are made to enhance businesses and reduce their risks. He explained that the law, with the reduction in personal income tax to 25 per cent, seeks to create incentives for business formalization.
He also stated that the law reduces the corporate tax rate from 30 to 25 per cent, and specified that under the new law, if a company’s annual turnover is N100 million or less, the corporate tax rate is 0 per cent.
He justified the structural change in tax rates by comparing the previous system to the new one: “Low income, no tax. Upper income, a bit more. Now, in many countries around the world, what you will find is that the top rates for personal income tax is usually higher than the rate for corporate tax so that you can incentivise business formalisation. So when you operate in the informal sector and you want to pay your taxes, your maximum income tax doesn’t even hit 20 percent. Same business, formalize it, register as a company, your tax burden goes to over 40 percent. And then we lament that the informal sector is too big. We were creating it, we created a disincentive to formalization. We are now trying to reverse it. It’s the reason why we have to take the top rates for personal income tax to 25 percent.”
