Federal Government Proposes 50% Tax Relief to Companies to Boost Worker Salaries

New tax reforms aim to encourage wage increases and ease transportation costs for low-income workers in Nigeria

The Nigerian Federal Government has introduced a new initiative aimed at providing a 50% tax relief for firms increasing wages, helping employers improve salaries or offer transportation allowances to low-income employees. This initiative forms part of a broader legislative proposal designed to reform the country’s tax framework and incentivize wage growth for workers earning N100,000 or less per month.

According to the proposed “Nigeria Tax Act” introduced on October 4, 2024, the government seeks to repeal outdated tax laws and unify the tax framework under a single legal system. A key component of this bill grants 50% tax relief for firms increasing wages, allowing additional deductions for companies covering salary increases or transportation allowances within 2023 and 2024. These incentives are specifically targeted at employees with gross monthly earnings not exceeding N100,000, thereby encouraging better wages for lower-income workers while fostering economic stability.

For companies that hire additional employees in 2023 or 2024, the bill extends this tax relief, provided new hires increase the workforce beyond previous averages and remain employed for at least three years. This measure aligns with the 50% tax relief for firms increasing wages, emphasizing long-term employment and financial stability for low-wage earners.

Further provisions include an Economic Development Incentive Certificate for companies engaged in capital investments. Firms applying for this certificate must submit applications through the Nigerian Investment Promotion Commission, accompanied by a nominal 0.1% fee on capital expenditure, capped at N5 million. The application will then be reviewed by the Minister, who may submit a final recommendation for presidential approval.

Through these steps, the 50% tax relief for firms increasing wages is designed not only to uplift low-income workers but also to stimulate broader investment in the Nigerian economy.