For our individual and collective information, the Federal Executive Council of Nigeria, in its meeting on Monday, 23rd September 2024, approved, among other things, the proposed ECONOMIC STABILISATION BILLS for submission to the National Assembly of the Federal Republic of Nigeria for legislative action.
The proposed Economic Stabilisation Bills embody the recommendations of the Presidential Committee on Tax and Fiscal Policy Reforms, set up by President Bola Ahmed Tinubu in 2023.
The proposed Economic Stabilisation Bills aim to:
- Amend Nigeria’s Income Tax Laws;
- Promote the export of goods and services from Nigeria;
- Reform the Exchange Rate Regime in Nigeria;
- Unlock Foreign Exchange earnings and liquidity for the country;
- Offer tax relief to companies that generate incremental employment in Nigeria; and
- Increase the Personal Income Tax Relief (Consolidated Relief Allowance) for individuals in both private and public employment, from the current CRA of N200,000 to N400,000.
In light of the above, it is imperative for Muslims, especially Zakat and tax payers in Nigeria, to prepare to politically leverage these legislative efforts and advocate for making Zakat deductible, in line with global best practices, just as taxes are deductible!
Zakat Deductibility means that whatever a person pays as Zakat to any recognized Zakat institution annually would be deducted from their total Personal or Company Income Tax before calculating the net tax payable to the relevant authorities in Nigeria. This initiative is designed not only to encourage voluntary payment of both Zakat and tax dues, but also to promote the Voluntary Tax Compliance Policy of the Federal Government of Nigeria.
It may interest some to know that Zakat payments are tax-deductible in many countries, such as Indonesia, Malaysia, and Brunei, where the system recognizes that Zakat, like taxes, is used to finance public welfare, particularly for the poor, needy, and vulnerable. This system also helps reduce income inequality. Allowing Zakat deductibility in Nigeria would reduce the burden of what many perceive as double taxation when paying both Zakat and taxes.
Zakat, one of the Five Pillars of Islam, is a religious duty for all Muslims who meet the necessary wealth criteria (Nisab). It is meant to help the poor and needy. Zakat is typically collected by designated Zakat and Waqf Commissions, Boards, Authorities, or Committees and distributed to the eight categories of beneficiaries clearly specified in the Holy Qur’an on behalf of Zakat payers.
Zakat on wealth is calculated at 2.5% (1/40) of a Muslim’s total savings and wealth above a minimum amount, known as Nisab, and is payable annually based on the lunar calendar.
In most Muslim-majority countries, Zakat payments are voluntary. However, in some countries, including Libya, Malaysia, Pakistan, Saudi Arabia, Sudan, and Yemen, Zakat is mandatory and collected by the government.
I urge Zakat and tax payers in Nigeria to take advantage of the proposed legislative bills and ensure that Zakat deductibility is included in the proposed tax reliefs and allowances.
Wishing all the best, now and always!
©️ Engr. Kabiru el-Hussain Rumah, Jakadan Rumah, Founder and CEO of Jakadan Rumah Foundation (JRF), Katsina State, the Home of Hospitality. He can be reached at elhussainikabiru@gmail.com and 08038473713.