ABUJA – In a bold move to enhance revenue generation and foster economic stability, the Federal Inland Revenue Service (FIRS) has commenced the implementation of a revamped withholding tax system. The initiative, according to the tax authority, is set to streamline tax collection, curb evasion, and bolster national development.
Collins Omokaro, Special Adviser on Communication and Advocacy to the Executive Chairman of FIRS, disclosed in a statement yesterday that the new regulations are designed to improve compliance, enhance transparency, and ensure a fairer tax structure across various sectors.
Key Features of the Withholding Tax System
The FIRS outlined that the new rules will mandate the deduction of taxes at the source for payments related to salaries, rent, professional fees, and dividends. By shifting the responsibility to businesses, employers, and other payers, the government aims to ensure a steady revenue inflow while minimizing loopholes that previously allowed tax evasion.
Omokaro further revealed that the initiative incorporates Tax Identification Numbers (TINs) into all relevant transactions, ensuring better tracking and accountability. Additionally, strict penalties for non-compliance have been introduced to enforce adherence to the new policy.
“The new regulation is a game-changer for Nigeria’s tax landscape. It will ensure that taxes are collected efficiently and transparently while fostering accountability among businesses and employers,” Omokaro stated.
The FIRS emphasized that adjustments to tax rates under the regulation are structured to support local businesses while ensuring a level playing field for foreign entities operating in Nigeria. The agency maintained that these changes would promote economic equity, ensuring that both individuals and businesses contribute their fair share to national development.
By expanding the tax net, the FIRS projects that the anticipated increase in revenue will fund essential public services, infrastructure development, and social programs, ultimately enhancing the quality of life for Nigerians.
Despite its anticipated benefits, the implementation of the new withholding tax system is not without challenges. The FIRS cautioned that businesses—particularly small and medium enterprises (SMEs)—may need to invest in software, training, and compliance mechanisms to ensure accurate tax deductions and remittances.
Additionally, industries such as gaming, telecommunications, and e-commerce will have to adapt to their unique tax obligations under the updated framework. The agency acknowledged that lack of awareness among small vendors and informal businesses could pose hurdles to full compliance.
Omokaro urged government agencies to intensify awareness campaigns to help businesses, especially SMEs, navigate the transition smoothly. “The introduction of this regulation comes with high expectations, and effective implementation will require cooperation from all stakeholders,” he added.
As Nigeria seeks to strengthen its tax system and optimize revenue collection, the FIRS remains confident that this initiative will lay the foundation for a more transparent, fair, and efficient tax regime—one that drives economic growth and ensures long-term financial sustainability.
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