The Federal Inland Revenue Service (FIRS) has begun implementing the withholding tax system, aimed at improving tax compliance and boosting government revenue.
In a statement, Collins Omokaro, Special Adviser to the Executive Chairman of the FIRS on Communication and Advocacy, stated that the new withholding tax system aims to streamline tax collection, improve compliance, and boost revenue for key sectors.
Under this regulation, businesses, employers, and other payers are required to deduct taxes directly from payments such as salaries, rent, professional fees, and dividends. This means that taxes will be withheld at the point of payment, ensuring a more efficient and transparent collection process.
According to the Federal Inland Revenue Service (FIRS), this new tax system is designed to ensure a steady revenue stream while curbing tax evasion. One of the key measures is the integration of Tax Identification Numbers (TINs) with financial transactions, alongside strict penalties for non-compliance.
The agency also highlighted that adjustments in tax rates for both residents and non-residents aim to support local businesses while maintaining fairness for foreign entities operating in Nigeria. With this initiative, the FIRS expects to create a more transparent and equitable tax system—one where individuals and businesses contribute their fair share to national development.
The increased revenue from this initiative is expected to boost public services, drive economic growth, and enhance living standards in Nigeria.
The FIRS acknowledges that businesses may face challenges in implementing the new regulations. They may need to upgrade their systems and train staff to ensure accurate tax deductions. Smaller enterprises, in particular, could struggle with compliance due to limited awareness. Additionally, industries such as gaming and telecommunications will need to navigate sector-specific tax requirements and adapt to the new regulations to remain compliant.
Omokaro described the regulation as a transformative step for Nigeria’s tax system, emphasizing that its success hinges on proper implementation and stakeholder collaboration. He urged government agencies to intensify awareness efforts to ensure businesses, especially SMEs, adapt seamlessly to the new framework.
