LIRS Projects Major Tax Relief as 98% of Workers Set to Pay Less or Zero Tax
The Lagos State Internal Revenue Service (LIRS) has disclosed that about 98 per cent of Nigerian workers will pay less personal income tax or no tax at all under the new tax regime recently introduced by the federal government.
The disclosure follows an extensive review and simulation exercise carried out by the agency using existing tax data, and it signals a major shift in how income taxation affects workers, especially low- and middle-income earners.
According to LIRS, the conclusion was reached after analysing close to 1.5 million anonymised taxpayer records from the 2024 assessment year and applying the new tax rules to those figures.
The outcome showed that more than half of all workers, estimated at about 54 per cent, would be completely exempt from paying personal income tax, while an additional 43 per cent would pay less tax than they currently do.
Only a very small segment, roughly 1.6 per cent of taxpayers, mostly higher-income earners, are expected to see an increase in their tax obligations under the new framework.
The agency explained that the new tax regime was deliberately structured to reduce the burden on ordinary workers at a time when inflation and rising living costs are putting pressure on household finances.
By expanding tax-free income thresholds and adjusting tax bands, the reforms aim to protect low-income earners while ensuring that taxation remains progressive.
Under the revised structure, individuals earning around ₦800,000 annually or less fall within the zero-tax bracket, meaning millions of workers will no longer have PAYE deductions from their salaries.
LIRS officials noted that early feedback from employers and employees suggests that the reforms are already being felt, with many workers reporting higher take-home pay due to reduced PAYE deductions in their January salaries.
This increase in disposable income is expected to support consumer spending, improve household welfare and stimulate broader economic activity, particularly in urban centres like Lagos where wage earners form a large part of the population.
Authorities believe that a fairer system that eases pressure on the majority of earners will ultimately improve compliance levels and widen the tax net over time, even if short-term revenues appear modest.
Overall, the LIRS assessment underscores a significant policy shift that places workers at the centre of Nigeria’s tax reforms.
With nearly all workers set to pay less or nothing in personal income tax, the new regime represents a decisive move toward a more equitable tax system, offering relief to millions of Nigerians while laying the groundwork for a more sustainable and growth-friendly fiscal environment.
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