Wia dis foto come from, Getty Images
- Author, Nkechi Ogbonna
- Role, BBC News, Lagos
Nigeria goment don agree to remove withholding tax for small businesses and to reduce tax rates for businesses wey get low profit and also make exemptions for manufacturers and farmers.
Chairman, Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, tok on Tuesday for im official X handle .
According to Oyedele, di move na part of di ongoing fiscal policy and tax reforms, wey go address long-standing challenges for di tax system for di kontri.
Wetin be withholding tax
Withholding tax na advance income tax payment, wey dem dey deduct from source. Di aim na to bring taxpayers like contractors, suppliers, manufacturers, landlords etc into di tax net.
Dem dey pay am directly to goment on behalf of who dey collect am.
Na for 1977 dem first introduce am into di tax system for Nigeria and e dey designed to give goment regular revenue flow and to serve as a way to reduce di number of pipo wey dey avoid tax.
Di current withholding tax rate for Nigeria dey between 5-10%, depending on di transaction and e dey show for payments wey include rent, fees, interests, service delivery, dividends on shares etc.
Why goment dey remove dis tax?
Nigeria goment say afta di ongoing tax and fiscal policy reforms, dem identify some shortfalls wey include tins wey no clear wey concern di pipo wey suppose comply wit di payment of withholding tax, transactions wey dey eligible, applicable rates, and di right time for payment, among odas.
Dem also tok say dem bin dey treat withholding tax like say na separate tax, and e don increase di list of multiple taxes, cost of doing business for di kontri and e also promote tax inequity.
Nigeria goment belive say if dem remove withholding tax from producers including farmers e fit help reduce food and commodity prices.
Authorities say dis new policy fit eliminate certain contradictions for dia policies, especially wit small businesses wey dem bin don originally remove dem from taxes sake of dia low profit margin but bin dey subjected to withholding taxes.
Who go benefit and wetin e mean for dem?
For Nigeria, dem dey describe small businesses as enterprises wey get an annual turnover of less dan twenty five million naira ($16,500) and di number of dia workers no reach fifty pipo.
Di largest nation for Africa dey face dia worst economic crisis in a generation wit inflation wey dey over 33% currently and cost of food and oda commodities dey rise.
Food products like tomato, peppers, pasta, eggs and vegetable oil don increase well well in di last one year and di as fuel dey cost plus di weak local currency - di Naira - no help di mata at all.
Under dis new policy, small businesses dey excused from paying withholding tax. E also include reduced rates for businesses wey get low margins, dem also excuse manufacturers and producers like farmers.
Even though di west African kontri go dey lose revenues from dis small businesses, Dr. Olusegun Vincent one tax consultant for di Pan Atlantic University, Lagos believe say di new policy get medium to long-term effect on di business environment.
“Di goment dey put money back into di pockets of small businesses. Now, dem go get more money to boost production, employ more workers and increase di Gross Domestic Product of di economy wey dey sick.” Im tell BBC.
For 2020, management consulting firm Price Water Coopers (PwC) report say Nigeria Micro Small and Medium scale Enterprises dey account for about 96% of all businesses for di kontri; employ about 84% of di workforce for di kontri; and contribute about 49% to di revenues wey di kontri dey get.
“Na double edged sword. Di goment dey look for revenues but e dey beta to prioritise operating businesses becos dis companies go fit continue dia businesses no mata how small e be, e go get impact as e go help reduce prices of food and inflation wey dey rise.” Dr Vincent add.
Authorities neva set di date yet wey di policy go start following di approval, but small businesses and farmers fit breathe well wen dem implement am..