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The Federal Government has commenced a review of withholding tax, digital taxation and tax rules affecting cross-border businesses as part of efforts to create a simpler and more competitive operating environment for businesses.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, inaugurated a Technical Subcommittee on Fiscal Policy and Tax Reforms in Abuja to examine the three areas and develop recommendations for the proposed Finance Bill 2027.
The subcommittee has been given six weeks to complete its assignment, which includes reviewing Nigeria’s withholding tax regulations and the Significant Economic Presence framework governing the taxation of certain digital and cross-border businesses.
Government targets lower compliance and working-capital pressures
Oyedele said the review was necessary to ensure that Nigeria’s tax system does not impose avoidable pressure on business working capital or create additional costs that could undermine investment and expansion.
He described withholding tax as an advance payment and compliance mechanism rather than an additional cost of doing business or a tax on working capital.
“Withholding tax is an advance payment and compliance mechanism, not an additional cost of doing business or a tax on working capital,” the minister said.
Under the existing framework, withholding tax rates for resident taxpayers with a valid Tax Identification Number range from 2% to 15%, depending on the nature of the transaction. Dividends, interest and rent, for example, attract a 10% rate, while directors’ fees and royalties may attract rates between 10% and 15%.
The rates can be higher for operators without valid TINs, while non-resident individuals and companies are subject to rates ranging from approximately 5% to 15%.
Oyedele noted that the issue was particularly important given the high cost of capital in Nigeria. He said withholding funds belonging to businesses for prolonged periods could impose significant financial costs and weaken their ability to operate or grow.
The committee is therefore expected to assess existing deduction-at-source rules against the new tax laws and recommend changes that improve compliance without creating unnecessary financial strain.
Review of digital and cross-border taxation
The minister also directed the subcommittee to review the Significant Economic Presence Order 2020 and develop an updated framework aligned with Nigeria’s new tax legislation and international best practices.
He said the government must protect the country’s legitimate tax base as economic activity becomes increasingly digital and international, while ensuring that tax rules do not discourage technology companies or cross-border investment.
“Nigeria must protect its legitimate taxing rights while remaining competitive for technology and cross-border investment,” Oyedele said.
The review is intended to strike a balance between revenue protection and the need to maintain Nigeria’s attractiveness as a destination for international businesses.
Oyedele said the wider reform programme was also designed to reduce the complexity of the tax system, which has increased compliance costs and created opportunities for discretion and tax arbitrage.
“Complexity is itself a cost. It raises compliance costs and creates room for discretion and arbitrage,” he said.
He instructed the committee to favour simpler policy options where different approaches could achieve the same objective.
Public consultation highlights tax reform concerns
Oyedele disclosed that the government received 134 submissions through its online public consultation on fiscal and tax reforms, in addition to further submissions made physically.
The submissions came from businesses, investors, professional associations, civil society organisations, academics and members of the public.
According to the minister, the feedback highlighted the need for clearer provisions in the new tax laws, particularly around value-added tax thresholds, withholding tax and capital gains treatment.
Other proposals focused on strengthening taxpayer rights, accelerating tax refunds and introducing safeguards for small businesses.
The committee will also consider measures that could improve investment and competitiveness in sectors such as mining, renewable energy, healthcare and the capital market.
Multiple taxation and weak coordination among revenue authorities were identified as additional concerns. Oyedele said improved collaboration, digitalisation and data sharing among revenue agencies could reduce the burden on taxpayers by eliminating repeated requests for information already held by government institutions.
He said fiscal reform should promote investment, production, productivity and business formalisation rather than discourage economic activity.
“Our philosophy remains that we should not tax the seed but the fruits,” he said.
Evidence-based approach to policy recommendations
Oyedele urged members of the subcommittee to assess proposals based on evidence and their wider economic implications rather than popularity or the identity of the individual or organisation presenting them.
He said members should examine the problem each proposal seeks to solve, its cost, the likely beneficiaries and those who would bear the burden, as well as possible unintended consequences.
He warned that a tax measure capable of increasing government revenue could impose a much greater cost on the wider economy if it discourages investment or productive activity.
The committee was also asked to assess the effect of proposed measures on low-income earners, households, workers, small businesses, women and young people.
Where policy changes create winners and losers, Oyedele said appropriate safeguards and balancing measures should be considered. He also urged members to evaluate the long-term consequences of recommendations to ensure that solutions to immediate problems do not create new distortions.
Finance Bill 2027 to build on 2025 tax reforms
Oyedele said the review followed the enactment of what he described as Nigeria’s most comprehensive tax reform in decades.
He recalled that when President Bola Tinubu established the Presidential Fiscal Policy and Tax Reforms Committee in July 2023, Nigeria’s tax system was fragmented and complex, with businesses facing multiple taxes and overlapping revenue agencies.
The system, he said, placed a disproportionate burden on low-income Nigerians and small businesses, while government revenue remained constrained.
The reform process subsequently resulted in the Nigeria Tax Act 2025, Nigeria Tax Administration Act 2025, Nigeria Revenue Service Establishment Act 2025 and Joint Revenue Board Establishment Act 2025.
However, the minister stressed that the enactment of legislation did not bring the reform process to an end.
“No serious reforms end with the enactment of legislation. Good reform is a process, not an event,” Oyedele said.
He said implementation would reveal areas where taxpayers, businesses, administrators and investors encountered difficulties requiring clarification, adjustment or additional reform.
The Finance Bill 2027, he explained, should not be treated as another routine annual legislative exercise or an attempt to rewrite the 2025 reforms. Instead, it should retain the core principles of the existing framework while addressing challenges exposed during implementation and responding to emerging economic realities.
Stakeholders to support collaborative drafting process
The technical process brings together representatives from the Ministry of Finance, Ministry of Justice, Nigeria Revenue Service, Joint Revenue Board, professional bodies, the organised private sector and other stakeholders.
Oyedele said the broad representation was intended to ensure that issues were resolved collaboratively rather than through isolated institutional positions.
He directed the Ministry of Justice to participate throughout the drafting process instead of waiting until the documents had been completed before conducting a legal review.
Members were also instructed to maintain confidentiality over deliberations and working documents until authorised for release. They are required to disclose conflicts of interest and withdraw from voting on matters where such conflicts exist.
Oyedele reminded members that they were appointed to contribute their professional expertise to a national assignment rather than advance narrow institutional interests.
He said the reform programme had moved from restructuring the tax system to improving how the new framework works in practice.
“The first phase of our reforms was about changing the architecture. The next phase must be about making that architecture work better,” he said.
According to him, the success of the next phase should be measured not by the number of legislative provisions amended, but by the number of practical problems resolved for taxpayers and the wider economy.
Subcommittee pledges timely recommendations
Speaking at the inauguration, the Co-Chair of the Technical Subcommittee, Albert Folorunsho, described the assignment as important and time-sensitive.
He said the committee understood that its mandate covered the preparation of the Finance Bill 2027, review of withholding tax regulations and examination of the Significant Economic Presence Order.
Folorunsho said the recommendations would seek to produce a tax system that is fair, clear and efficient while supporting investment and sustainable economic growth.
He added that the committee would ensure its proposals were technically sound, practical for tax administrators to implement and responsive to the concerns of taxpayers, businesses and government.
Although the six-week deadline was tight, Folorunsho expressed confidence that the experience and commitment of members would enable them to deliver within the required period.
“Although six weeks seems like a short period, I am confident that with the experience and commitment represented in this room, we can deliver within this time frame,” he said.
He assured the minister that members would approach the assignment with diligence, objectivity and a commitment to producing recommendations capable of meeting the expectations of the reform process.
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