The Federal Government (FG) has signed into law, the proposed withholding tax, recommended by the presidential fiscal policy and tax reforms committee.
This was disclosed by Taiwo Oyedele, chairman of the Committee in Lagos during exposure and impact assessment session with journalists.
“We sent the withholding tax proposal to the National Assembly for approval. From proposal to approval. I just heard at airport that it has been signed, “ he said.
What this implies is that manufacturers and Small and Medium Enterprises (SMEs) will now enjoy withholding tax exemption.
The committee had proposed some key changes to withholding tax. The objective of 2024 withholding tax regulations Key changes include simplify the tax deduction at source system, reduce the burden on businesses including SMEs, promote competitiveness, equity and
ease of compliance, prevent tax avoidance and detect tax evasion to close the tax gap, reflect emerging issues and adopt global best practices.
According to Oyedele, the proposed changes seek to address the identified challenges while promoting the stated objectives. They include: exemption of small businesses from Withholding Tax Obligations, lower rates for businesses with low margins, exemptions for manufacturers and producers such as farmers, measures to curb tax evasion and avoidance.
The committee proposed a significant reform of Nigeria’s tax system, aiming to streamline the process, eliminate ineffective taxes, and improve fairness for small businesses and low-income earners.
The plan, outlined by the committee as outlined by Oyedele, focuses on five key areas: eliminating Nuisance Taxes: The committee proposes doing away with taxes that generate minimal revenue but require high collection costs, disproportionately impacting low-income earners and small businesses.
Prioritising High-Yield Taxes: The focus will shift towards broad-based taxes that are easier and more cost-effective to collect, ultimately generating a more stable revenue stream.
Tax Base Merging: The committee suggests merging taxes and levies that target the same or similar aspects of the economy, reducing redundancy and simplifying compliance.
Streamlined Tax Structure: The proposal aims to limit the total number of taxes levied across all government levels to a single digit, making the system easier to navigate.
Sustainable Reform: Measures will be implemented to ensure the long-term viability of the reformed tax system.
This initiative, if implemented, could significantly impact the Nigerian business landscape. By simplifying the tax code, reducing the burden on small businesses, and ensuring fairer taxation practices, the reforms could stimulate economic growth and create a more level playing field for entrepreneurs.
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