Nigeria has a low tax-to-GDP ratio of 10.8%. Recent tax reforms proposed by President Bola Tinubu aim to reduce personal income taxes, exempt small businesses, and lower corporate tax rates. These changes are intended to enhance tax compliance, broaden the tax base, and improve revenue for the government while benefiting citizens and businesses.

Nigeria currently has one of the lowest tax collection rates globally, with a tax-to-GDP ratio standing at 10.8%, significantly below Africa’s average of 16% and OECD’s average of 33.9%. All residents are liable for income taxes based on their worldwide earnings, while non-residents pay taxes only if their employment duties are conducted in Nigeria. Foreign individuals generating business profits within Nigeria also face taxation under Section 6 of the Personal Income Tax (Amendment) Act, 2011 if they establish a taxable presence.

The context of income taxation in Nigeria shows that resident companies are held responsible for Corporate Income Tax (CIT) on their global earnings, while non-resident companies are taxed only on income sourced from Nigeria. The CIT rates vary by company size, with large companies paying 30%, medium companies 20%, and small businesses having a zero percent tax rate.

The tax reform bills proposed by President Bola Tinubu aim to enhance the tax collection system in Nigeria. The changes include reducing personal income tax rates, exempting small businesses from income tax, and lowering the top CIT rate for bigger firms. These reforms are designed to bolster the tax base, improve compliance, and increase government revenue, creating a beneficial environment for citizens, businesses, and the government.

Original Source: www.thisdaylive.com