The Federal Government has approved the exemption of small businesses, manufacturers, and farmers from paying withholding tax to alleviate the tax burden on these sectors.
This new regime, announced by Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, was approved by President Bola Tinubu and will be officially gazetted soon.
Relief for Businesses
The announcement comes as welcome news for many Nigerian businesses, particularly those struggling with tight margins. The previous withholding tax system, introduced in 1977, has been criticized for being overly complex and placing a heavy burden on companies. Withholding tax acts as an advance payment of income tax on specified transactions.
According to Oyedele, the old system also suffered from ambiguity in its definitions and timing of deductions. Businesses faced penalties for late filing, adding to their financial strain.
Focus on Growth
The new regime aims to address these issues by offering exemptions and reduced rates. This will provide much-needed relief to key sectors of the Nigerian economy, allowing them to focus on growth and job creation.
The reform package also includes measures to tackle tax evasion and avoidance, while promoting easier access to credit for businesses. The expectation is that these changes will lead to a more efficient tax system that benefits both the government and the private sector.