The Federal Inland Revenue Service (FIRS) has announced the commencement of the implementation of the withholding tax system.

This is aimed at streamlining tax collection, enhancing compliance, and boosting revenue for critical sectors.

In a statement issued on Monday, Collins Omokaro, special adviser to the executive chairman of the FIRS on communication and advocacy, said that the new system would ensure efficient and transparent tax collection while fostering accountability among businesses and employers.

The regulation mandates the deduction of taxes directly from payments such as salaries, rent, professional fees, and dividends, placing the responsibility on businesses, employers, and other payers to withhold taxes at the point of payment.

According to the FIRS, this approach is designed to guarantee a steady inflow of revenue and minimize tax evasion.

A key feature of the regulation is the integration of Tax Identification Numbers (TINs) with transactions, alongside the establishment of penalties for non-compliance.

The agency also noted that adjustments to tax rates for both residents and non-residents are intended to support local businesses while ensuring fairness for foreign entities operating in Nigeria.

The FIRS projected that the initiative would create a more equitable tax system, ensuring that individuals and businesses contribute their fair share to national development.

The anticipated increase in revenue is expected to fund essential public services, stimulate economic growth, and improve the quality of life for Nigerians.

Despite the potential benefits, the FIRS acknowledged challenges in implementing the new regulation. Businesses may need to invest in software and training to accurately deduct and remit taxes, while smaller enterprises and vendors might struggle with compliance due to a lack of awareness.

Additionally, industries such as gaming and telecommunications will have to adapt to sector-specific tax obligations.

Omokaro described the regulation as a “game-changer” for Nigeria’s tax landscape, stressing that its success would depend on effective implementation and cooperation among all stakeholders.

He urged government agencies to intensify awareness campaigns to help businesses, particularly small and medium enterprises, navigate the transition smoothly.

Credit: thenationonlineng.net