EFFECTIVE ADMINISTRATION OF WITHHOLDING TAX REGIME IN NIGERIA AND IMPLICATION ON NATIONAL DEVELOPMENT

Abstract

Withholding tax is not classified among the different types of taxes in Nigeria like the Companies Income Tax, Personal IncomeTax, Petroleum Profits Tax etc, though it is embedded in most of the  tax  laws.  Unlike  other  types  of  taxes  that  have  laws  establishing  them  and  stipulating  the extent of liability of tax-paying entities to them,  withholding tax does not have a particular law that  establishes  it,  even  though  it  is  found  in  the  various  provisions  of  the  major  tax  laws.  The various provisions of the tax laws levy withholding tax at the rate of five (5) percent or ten (10) percent,  as  the  case  may  be.  This  tax  is  deducted  at  source  ie,  withheld  from  the  payment  due party  B  by  party  A,  the  payer.  This  creates  more  tax  collectors,  which  ought  to  make  the enforcement  easier  and  less  expensive.  However,  these  huge  number  of  collectors/remitters  at times act as impediments in the implementation of the tax due to the propensity for  non-remittal or partial remittal of most of the deducted or withheld funds. The lack of adequate manpower on the  part  of  the  tax  authorities  to  check  mate  non-remittal  or  partial  remittal  of  the  same  has made  it  imperative  to  rethink  the  mode  of  administration  of  this  tax,  with  a  view  to  creating incentives that will encourage the remittal of the same, in the form of some financial reward for timely  and  complete  remittal  and  also  encouraging  whistle  blowingin  this  area.  Furthermore, adequate  utilisation  of  the  realised  revenue  for  the  immediate  benefit  of  the  locals  where  tax  is generated will go a long way in ensuring more compliance to it.