Nigeria to Exempt Small Businesses from Paying Withholding Tax in A New Reform

In a decisive move towards economic reform, the Presidential Fiscal Policy and Tax Reforms Committee unveiled plans to overhaul national withholding tax laws, specifically proposing exemptions for small businesses.

Taiwo Oyedele, the committee’s chairman, disclosed these intentions during an interactive session on Tuesday, engaging stakeholders from trade associations, and non-governmental organizations, including the Civil Society and Religious Organizations.

“Stakeholder collaboration is crucial for informed policy decisions,” stated Oyedele, emphasizing the integral role of associations and NGOs in advocating good governance and championing social impact.

The committee outlined a comprehensive agenda, focusing on establishing a new national tax and fiscal policy framework. Oyedele stressed the necessity for streamlined processes, stating, “Harmonization across taxes, levies, revenue administration, and reporting is essential for effective governance.”

Among the core proposals, Oyedele highlighted the consolidation and redrafting of major tax laws. “We’re committed to introducing a revised withholding tax regime that fosters business growth,” he affirmed, signaling reduced rates for active income and a pivotal exemption for Small and Medium Enterprises (SMEs).

“We aim to be strategic in taxation,” Oyedele said, aligning with the President’s vision. “Our objective is to nurture businesses from inception; ensuring taxes are reasonable and just when they yield fruit.”

The tax reform chief reiterated the committee’s focus on enhancing revenue collection through compliance measures rather than introducing new taxes. “Closing compliance gaps and addressing evasion are critical steps,” he emphasized, outlining intentions to repeal existing taxes and extend exemptions to deserving entities.

The chairman also unveiled plans to revamp the role of tax agents, emphasizing competence and ethics to eradicate corruption among officials, ensuring a fair tax system.

Acknowledging the challenges faced by NGOs, particularly concerning environmental regulations and taxation, Oyedele reassured efforts towards creating a conducive environment and facilitating economic reforms. “We strive to foster a friendly environment, promoting freedom of association,” he assured.

Furthermore, plans were hinted at to streamline public service functions, optimize financial management, and maximize government assets and natural resources for collective benefit.

Envisaging the outcomes of these reforms, Oyedele emphasized the committee’s dedication to achieving sustainable growth and economic diversification. “We aim to pivot from mere GDP metrics to secure foreign exchange receipts,” he said, stressing self-sufficiency in critical sectors like food security, energy, and health.

“First, we expect to be able to achieve sustainable growth and economic diversification, not just by GDP as we have it. Now, in terms of foreign exchange receipts. That would mean that our country is less exposed to risk, particularly external risks like Russia, Ukraine Hamas and Israel are having issues. It affects us.

“We must develop our policy to be self-sufficient in most critical areas. In my view, those critical areas include food security, energy, and security. You must be able to provide your own energy, electricity and whatever forms of energy you need to power your economy, and the third one is health security,” he added.

In a supportive remark, Chinedu Bassey, program manager at the Civil Society Legislative Advocacy Centre (CISLAC), urged the committee to prioritize safeguarding the rights of NGOs. Bassey underscored the necessity for long-term, low-interest rate loans to facilitate small business finance and advocated policies endorsing domestically manufactured goods within Nigeria.

The proposed reforms present a potential shift in Nigeria’s fiscal policies, focusing on fostering a conducive environment for business growth while ensuring equitable taxation and economic stability.