A recent wave of online misinformation has caused significant confusion among Nigerians regarding the Federal Inland Revenue Service's (FIRS) stance on taxing personal savings. The FIRS has moved to set the record straight, clarifying that a longstanding tax on investment income is being misrepresented as a new levy on savings.
Existing Tax Law, Not a New Policy
Contrary to viral claims, the Federal Inland Revenue Service is not introducing a new tax. The authority to deduct withholding tax from interest earned on financial instruments has existed for a long time under the Companies Income Tax Act (CITA). This legal provision empowers the FIRS to collect tax directly at the source from income generated by investments like Treasury bills, corporate bonds, and promissory notes.
The recent action by the FIRS was simply a reminder to financial institutions about their responsibility to enforce this existing tax provision more rigorously. It is a step towards ensuring compliance, not the creation of a new fiscal policy.
Critical Distinction: Savings vs. Investment Income
A key point of clarification addresses a major public misconception. The FIRS has explicitly stated that it is not targeting savings accounts. The money you hold in your savings account, the principal, remains untouched by this tax.
What is considered taxable income is the interest earned on those savings and other investments. This distinction is fundamental. The tax applies to the profit generated from your funds, not the original amount you deposited. Furthermore, the government has confirmed that there has been no increase in taxes or the introduction of new taxes since it took office.
Global Practice and Nigeria's Revenue Goals
The renewed enforcement aligns with standard global tax practices, where authorities automatically deduct taxes on investment returns to improve compliance and broaden the revenue base. This measure is a component of Nigeria's broader 2025 Tax Reform strategy.
This strategy aims to boost non-oil revenue in response to challenges such as declining oil output and rising public debt. The policy on taxing investment interest is not new; a temporary exemption on these earnings expired last year. The current enforcement is a return to the status quo of existing law, ensuring that all taxable income, including from investments, contributes to the national treasury.
Understanding these nuances is vital to countering the spread of misinformation. The FIRS's actions are focused on investment earnings, which have been taxable for years, and do not represent an attack on the personal savings of Nigerians.
