Workers Urge FG to Reduce PAYE Tax Amid Rising Cost of Living
Federal Government workers have called on the Federal Government to reconsider the amount of Pay As You Earn (PAYE) tax deducted from their monthly salaries, saying the deductions are putting additional pressure on their finances amid rising living costs.
The workers, who spoke with journalists in Abuja, argued that increasing prices of goods and services have significantly reduced their purchasing power, making it difficult for them to cope with their existing income after tax deductions.
Key Development
The workers expressed concern over what they described as high income-tax deductions from their salaries.
One civil servant, Erica Eniola, cited the example of a Level 15 officer earning less than ₦400,000 monthly who, according to her, could pay almost ₦60,000 in tax. She argued that the tax burden should be reviewed in light of current economic conditions.
Another worker, Ibrahim Abbas, a pharmacist, questioned the taxation of certain allowances in addition to PAYE deductions. Other workers also argued that they continue to bear significant out-of-pocket costs for necessities such as electricity, water and security, despite paying taxes.
The concerns come at a time when workers and organised labour are also calling for measures to address declining purchasing power and the broader cost-of-living pressures.
What Taxpayers Need to Know
PAYE is a system through which an employer deducts an employee's personal income tax from salary or other taxable employment income and remits it to the relevant tax authority.
However, a high deduction on a payslip does not necessarily mean that an employee is being incorrectly taxed. PAYE is calculated based on the employee's taxable income and the applicable tax rules, rather than simply applying a flat percentage to gross salary.
Workers should therefore:
- Review their payslips regularly to understand their PAYE deductions.
- Confirm that taxable income has been correctly determined.
- Ensure that applicable reliefs, exemptions and deductions are properly considered.
- Request clarification from their employer where PAYE deductions appear inconsistent with their circumstances.
- Keep relevant employment and tax records for verification where necessary.
Tax Analysis: Is PAYE Really the Problem?
The workers' concerns raise an important tax-policy question: should tax policy respond to rising living costs by reducing personal income tax, or should the focus be on increasing real incomes and purchasing power?
A reduction in PAYE could increase employees' take-home pay, but its impact would depend on which income groups benefit and by how much.
This is particularly important under Nigeria's new tax framework. Earlier government projections indicated that the reforms were designed to protect low-income earners, with the Federal Government stating that a large majority of workers would be exempt from PAYE under the new regime.
At the same time, the Chartered Institute of Taxation of Nigeria (CITN) reported in April 2026 that some salary earners were already experiencing lower monthly deductions following implementation of the new tax laws.
This creates an important distinction between tax liability and purchasing power. Even where an employee's PAYE liability is reduced, rising costs of food, transportation, housing and other essentials can continue to erode the employee's real income.
The ongoing review of Nigeria's tax reforms is therefore significant. The Federal Government has commenced a six-week review aimed at identifying implementation gaps, ambiguities and unintended consequences, with recommendations expected to contribute to the Finance Bill 2027.
AdaTax Matters Take
The debate around PAYE should not be reduced to whether workers are paying “too much tax.” The more important question is whether Nigeria's personal income tax system is achieving the right balance between revenue generation, fairness and the protection of taxpayers' purchasing power.
A sustainable tax system should ensure that taxpayers contribute according to their ability while maintaining sufficient disposable income to meet basic needs and participate meaningfully in the economy.
As the government continues its review of the tax reforms, feedback from employees and other taxpayers can provide useful insight into how the rules are working in practice.
For taxpayers, the key takeaway remains simple: understand your PAYE deductions, know your rights and ensure that your tax is calculated correctly under the applicable law.
Tax should be fair, transparent and proportionate to the taxpayer's ability to pay.
AdaTax Matters
Making Tax Simple. Keeping Taxpayers Informed.
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