In a bid to stimulate economic growth and ease the tax burden on small businesses and farmers, President Bola Tinubu has approved a new withholding tax policy that replaces the outdated 1977 regime. The announcement was made by Taiwo Ayodele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, on Tuesday.
The new policy is designed to address the concerns of small and medium-sized enterprises (SMEs), which have been disproportionately affected by the previous tax regime. Ayodele explained that the withholding tax was first introduced in 1977 to provide the government with a regular source of revenue and to curb tax evasion. However, over time, it has become clear that the policy has had unintended consequences, particularly for small businesses and farmers.
According to politics Nigeria, the new policy aims to rectify these issues by promoting tax equity, exempting small businesses from withholding tax compliance, and providing relief to manufacturers, producers, and farmers. Additionally, businesses with low margins will benefit from reduced rates, making it easier for them to stay afloat.
To prevent evasion and avoidance, the policy includes measures such as simplified credit facilities and clarity on deduction timing and key terms. This will enable businesses to plan their finances more effectively and reduce uncertainty.
The new policy will be published in the official gazette soon, marking a significant step towards creating a more business-friendly environment in Nigeria. With this development, small businesses and farmers can now focus on growing their operations without the burden of excessive taxation holding them back.