The Federal Government’s ongoing initiative to reduce tax burdens and optimise revenue achieved a significant milestone on Tuesday with the government’s approval to exempt small businesses, manufacturers and farmers from paying withholding tax.

This was as it said the National Assembly has received 10 requests to amend tax laws aimed at addressing identified challenges within the current tax regime.

The government also plans to begin full enforcement of these policies by January 2025.

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, disclosed the new information via a post on his official X handle on Tuesday.

Oyedele who leads the committee saddled with the responsibility to introduce a new tax structure in the country to spur economic growth and development, noted that the directive would serve as a way of reducing the tax burden on businesses.

According to the Federal Inland Revenue Service, Withholding Tax serves as a prepayment of Income Tax, deducted at rates between 5 per cent and 10 per cent depending on the transaction.

However, the implementation of the policy has caused pain to manufacturers due to the excessive burden of compliance hampering the productivity of the sector.

Meanwhile, the Presidential Committee on Fiscal Policy and Tax Reforms has also submitted copies of the new tax policies to President Bola Tinubu and the National Assembly. The President is expected to get the parliament’s approval on the matter.

According to Oyedele, the erstwhile withholding tax system has ambiguity which necessitated the increase in the list of multiple taxes, and inequity.

Small businesses, in particular, faced excessive compliance burdens, straining their working capital.

He said the newly approved regime aimed to address these challenges and introduce several key changes.

SMEs are now exempt from withholding tax compliance, reducing their administrative burden and allowing them to focus on growth.

Oyedele said, “As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has been approved.

“The key changes introduced are to address the identified challenges and specifically include the exemption of small businesses from Withholding Tax compliance and reduced rates for businesses with low margins.”

He added that key changes were introduced to the previous tax regime as businesses operating on low margins will also benefit from reduced withholding tax rates, easing financial pressures.

He also said the new regime included specific exemptions for manufacturers and producers, such as farmers, supporting the agricultural sector.

He said measures are also introduced to curb evasion and minimise tax avoidance, ensuring a fairer tax system.

The reforms will also simplify the process for businesses to obtain credit and utilise tax deducted at source, improving liquidity.

Oyedele further stated the approved regulations are expected to be published in the official gazette in the coming days.

Explaining further, the tax expert stated that key changes introduced to the rewritten withholding tax regime include; reduced rates for businesses with low margins, measures to curb evasion and tax avoidance, exemption of small businesses from withholding tax, clarity on the timing of deductions and key terms etc.

Others are “Exemptions for manufacturers and producers such as farmers, measures to curb evasion and minimise tax avoidance.


“Ease of obtaining credit and utilisation of tax deducted at source, changes to reflect emerging issues and adopt global best practices and clarity on the timing of deduction and definition of key terms.”

He said the changes also addressed emerging issues and aligned with global best practices, ensuring the tax system remained contemporary and effective and provided clarity on the timing of deductions and the definition of key terms.

Our correspondent gathered that the latest approval is the second of five planned executive orders to reduce inflation and grow tax revenue.

Last week, President Bola Ahmed Tinubu signed an Executive Order to introduce zero tariffs, excise duties, and VAT on specialised machinery, equipment and pharmaceutical raw materials to bolster local production of essential healthcare products.

The initiative focuses on pharmaceuticals, diagnostics, medical devices such as needles and syringes, biologicals, and medical textiles, positioning Nigeria to enhance its healthcare value chain significantly.

Commenting, the President of the Association of Small Business Owners, Femi Egbesola, applauded the initiative, stressing that it shows the government’s concern about challenges faced in the sector.

He said though the impact will of the policy will not affect the operations of micro and nano businesses, the association is pleased with the announcement.

He said, “Yes, we are happy but at the same time, we are looking for more. One is that we have so many multiple taxes that need to be collapsed and harmonized. Withholding tax is just one of the many. We also don’t want a situation whereby they release a bit and take twice what is released. An example is the electricity tariff.

“And not all SMEs pay withholding tax, the micro and Nano sectors don’t pay that tax even before now. It’s only those who collect contracts and supplies to the public institutions that are supposed to pay it. So the impact is not too much but it shows that the government is responsive and a good step in the right direction.

“We also want it to cascade to the sub-nationals, it’s not too good that it’s only happening at the federal level. A lot of taxes are at the state and local government. They even charge more than the federal government. So we want the reforms to reach other levels. They can collapse or harmonise the taxes into one making it easier to pay using a single portal.”

Meanwhile, the committee chairman said the implementation of the new tax laws would begin in January 2025.

He said this is to ensure proper discussions, sensitization and advocacy with the implementing agencies.

He stated that his committee has submitted approximately ten tax reform bills to the National Assembly for constitutional amendments.

Speaking further in an interview with Channels TV’s Sunrise Daily, the tax expert said, also mentioned that they have drafted entirely new versions of major tax laws in Nigeria, noting that most of the existing laws date back to the colonial era.

He noted that some of the issues identified by the committee necessitated legislative amendments, not just executive orders.

He said, “So we have made significant progress. We are now moving into phase three of our work. The first phase was quick wins, second was critical reforms. We just completed that and now we are moving to implementation. So as we speak, we have about five draft executive orders. We have a withholding tax regulation that has just been signed by the Minister. So it’s currently with the Ministry of Justice for the formatting, and gazetting and it will be published officially.

“We also have drafted brand new laws of all our major tax laws, because we took the view that we shouldn’t be amending laws since some of them were inherited from our colonial masters. There is no new need to amend them. We have also sent about 10 amendment bills to the National Assembly for constitutional amendments, because some of the issues we identified during the extensive work done emanated from the constitution itself, such as overlapping powers on taxing rights.

“So the final thing we are doing now is cross-referencing which is important in lawmaking and once we are done with that, we will get the formal approval of Mr. President and the Federal Executive Council. Then it goes to the National Assembly. We estimate that before the end of quarter three, we should have the laws enacted and that way we can give a 90-day notice because sometimes when you change rules and policies, people need to prepare for them even when they are positive. You need capacity training for regulators and all of that. And then the latest for any of our reforms to kick in will be January 2025, although many of them will kick this year like the withholding tax regulation.”

Oyedele revealed that the government was designing software to track the expenses of every Nigerian using the National Identification Number for accurate taxation.

“We want to move from asking people to tell us how much the end we want to be telling them what you have in mind. So we are developing a system now. We call it tax information consolidation and collaboration. There’s an executive order for it and we have a draft bill for it to be enacted into law. This system will use the National Identification number and registration code for businesses with the Corporate Affairs Commission. So that foundational identity will target every economic activity. Whether you’re opening a bank account, spending on your payment card, or travelling abroad. So if you input your name into the system, it tells your net worth and what you have spent for the year. So that will help us to identify who is poor and ensure proper taxation, he added.


https://punchng.com/tinubu-seeks-nassemblys-nod-as-tax-regime-begins-january/?utm_source=telegram&utm_medium=social

How's that possible?

Tinubu, Mr Tax collector, But nothing to show for it