On Tuesday, Taiwo Ayodele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, announced that President Bola Tinubu has given approval for a new withholding tax policy. This new policy replaces the outdated one that was approved during the 1977 regime.
The recently approved withholding tax policy, under the leadership of President Bola Tinubu, is specifically designed to alleviate the challenges faced by farmers and Small and Medium Enterprises (SMEs) that were significantly impacted by the previous regime. By implementing this reform, the government aims to support the growth and sustainability of farmers and SMEs, recognizing their vital role in the overall economy.
Ayodele noted, “Withholding tax was introduced into the Nigeria tax system in 1977 to serve as an advance payment of income tax on specified transactions. It was designed to provide the government with regular revenue flow and to serve as a means of curbing tax evasion.”
The recently introduced withholding tax policy brings about several important changes. It aims to promote fairness in taxation by exempting small businesses from withholding tax obligations. Additionally, manufacturers, producers, and farmers will also benefit from exemptions, while businesses with low profit margins will enjoy reduced tax rates.
The new regime also focuses on preventing tax evasion and avoidance, simplifying the process of obtaining credit, and providing clarity on deduction timing and key terms. The Chairman of the Tax Reforms Committee mentioned that the new policy will be officially published in the gazette in the near future.
