• Wednesday, February 28, 2024
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FG to review withholding tax laws to relief businesses

We want to be preferred location for technology, creative economy, retirement’ – Oyedele

The presidential fiscal policy and tax reforms committee has revealed that it is making changes to Nigeria’s withholding tax laws to ease the burden of businesses.

Taiwo Oyedele, chairman of the committee, disclosed this at an event hosted by Harvard Business School Association of Nigeria on Thursday.

The event themed ‘Reform Of Nigeria’s Fiscal System’ discussed the various reforms being embarked on by the committee and the potential implications for Nigerian businesses and business owners.

“We have drafted a new withholding tax regulation. The only reason why it has not been published is because some of the things we included require we amend some of the existing laws,” he said.

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He added that the committee has kept the amendment with the emergency bill, waiting for the lawmakers to pass and then issue the regulation to the public.

“When this is passed, it will help because it is creating a lot of burden on the working capital of businesses.”

According to the tax reform chief, manufacturers will pay zero withholding tax while they would reduce the tax for contractors or service providers.

“If you are not liable to tax, nobody will deduct withholding tax from you. And if you are liable to tax, we have distinguished between active and passive income. So, if you earn dividend or interest, we can keep it at 10 percent which is the rate globally,” he said.

Withholding tax is a form of advance payment of income tax. It is a payment on account of the ultimate income tax liability of the taxpayer or company.

It is charged at the rate of five or 10 percent depending on the type of payment or nature of the transaction and whether the payment’s beneficiary is an individual or a corporation.

But in Africa’s biggest economy, the tax regime is doing the opposite of what it was designed to do which is a problem for many businesses, especially at a time when rising inflationary pressures are affecting their operations.

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“It was meant to be largely an advance payment of your taxes. It should not apply when you don’t have taxes to pay and it should not be more than the taxes you should pay,” Oyedele said.

The tax leader also highlighted that there will be a new withholding tax with a lower rate for Small and Medium Scale Enterprises (SMEs).

“We are rewriting the tax laws to keep them simple and harmonised to help SMEs to easily pay taxes. By revamping the tax agent’s functions on SMEs, we need to expand the exceptions of small businesses to avoid exploitations from tax collectors. The tax obligations are too much for them to comply,” he said.