In a quest to lessen the impact of Covid 19 on her citizens, the federal government of Nigeria has proposed a new finance bill which will exempt the minimum wage earners from personal income tax.
This is a welcomed idea to provide an enabling environment for everyone in the country since there is going to be a perceived inflation.
The new minimum wage as approved by the federal government after several meetings with the Nigerian Labour Congress has not been implemented by all state governments.
This exemption is not the first time there will be an adjustment to the tax policies in the country.
An example is the finance bill which was passed in 2019 and later approved in February, 2020 before the pandemic and lockdown in Nigeria.
The new finance bill has not been approved by the national assembly but once it is approved, it will become a finance act.
What effect will this have on the economy?
- Bridging the gap
If peradventure, the finance bill is passed into act by the national assembly, it will help to bridge the gap between the poor and the rich but majorly earners of minimum wage.
- Increased disposable income.
Disposable income is the amount that is available for household after deducting the tax liability.
There will be a higher disposable income available for minimum wage earners since they will be exempted from personal income tax.
- Increased standard of living.
Since there is going to be an increased disposable income, there will be an increased standard of living since households will be able to afford more things even without an increase in the income level.
- Controlled inflation
Inflation is the persistent increase in the general price level of commodities.
To curb the excesses of inflation, there must be a corresponding increase in the income level in order for households to be able to afford quality commodities.
As an earner of minimum wage, if there is an exemption to minimum wage, in order to become more financially free, you should invest the amount exempted as personal income tax.
This will create another source of income aside from the regular minimum wage.
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