New tax laws are expected before end of this year, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said yesterday.
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According to him, ten amendment bills have been sent to the National Assembly to address constitutional issues, including overlapping taxing rights.
He said the committee drafted new tax bills instead of amending old ones.
“We took the view that amending outdated laws inherited from our colonial past was insufficient. Instead, we drafted new laws entirely.
“Our goal is to ensure clarity and avoid the suffering caused by conflicting taxes such as VAT and state-level consumption taxes,” Oyedele said.
The comprehensive reform approach is expected to culminate in the enactment of new laws by the end of the third quarter.
Some reforms, like the withholding tax regulation, may take effect this year, Oyedele said.
He also said the collection of Value Added Tax (VAT) on food items, healthcare, housing, education and transportation will soon end under a new policy.
“The majority of our population, over 130 million, spend almost their entire income just trying to survive.
“Therefore, it doesn’t make sense to try to extract taxes from them. They have no ability to pay.
“We have designed a new national fiscal policy for Nigeria that addresses how our taxes should be structured, protecting the poor and ensuring that wealthier individuals contribute more while leveraging technology for tax collection,” Oyedele said.
He added that states will get a VAT revenue boost by 90 per cent if they agree to discontinue the collection of consumption taxes.
He believes the proposed VAT increase will benefit state governments if they accept the collection adjustment.
Oyedele said: “We asked the states to discontinue consumption taxes as they are duplicating VAT.
“In compensation for that, their share of VAT revenue will go up to 90 per cent.
“The five per cent added is more than double what they collect as consumption taxes, so it is a win-win for them.”
He said President Bola Ahmed Tinubu has approved a new withholding tax policy, which replaces the one introduced in 1977.
DEDUCTION OF TAX AT SOURCE (WITHHOLDING) REGULATIONS 2024_T.Oyedele-1The new policy introduces significant reforms designed to alleviate the heavy burden that the previous system imposed on farmers and Small and Medium Enterprises (SMEs).
According to Oyedele, small businesses will now be exempt from withholding tax compliance, reducing their administrative and financial burdens.
Businesses with low-profit margins will benefit from reduced withholding tax rates, easing their cash flow and operational costs.
Producers, particularly farmers, will receive exemptions, fostering growth and sustainability in these critical sectors.
Oyedele, who was a guest on Channels Sunrise Daily, said the new measures aim to enhance compliance and reduce tax evasion and avoidance.
The policy streamlines the process of obtaining credit and utilising tax deducted at source, making it more accessible for businesses.
Updates to the new withholding tax regime will reflect emerging issues and align with global best practices.
Oyedele said: “Businesses, especially SMEs, faced ambiguities regarding compliance, eligible transactions, applicable rates, and remittance timing.
“This complexity resulted in an excessive compliance burden and strained working capital for low-margin businesses.”
According to him, the previous system treated withholding tax separately, adding to the list of multiple taxes and increasing the cost of doing business.
Besides, obtaining refunds for excess withholding tax was problematic, causing further financial strain on businesses.
The lack of an exemption threshold made compliance costs uneconomical for taxpayers and enforcement costs high for tax authorities.
Oyedele said a withholding tax regulation is presently with the Ministry of Justice for gazetting.
“This move will provide significant relief to businesses, particularly small businesses, by reducing the pressure on their working capital,” he said.
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