Kemi Adeosun Revokes Okonjo Iweala Tax Amendment

Okonjo-Iweala had in late 2014 amended the Companies Income Tax to effect a reduction in the withholding tax rate applicable to payments in respect of all aspects of building, construction, and related activities excluding survey, design and deliveries from five per cent to 2.5 per cent.

One year after the former Minister of Finance and Coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala amended the regulation which instituted a reduction in withholding tax for construction related activities, the current Minister of Finance, Mrs Kemi Adeosun has revoked the amendment.

Although it was not publicly announced, it came into effect on January 1, 2015 on publication in the official gazette. However, on the recommendation of the Federal Inland Revenue Service (FIRS), the Federal Ministry of Finance under Kemi Adeosun had approved the revocation which will see the withholding tax rate applicable to payments in respect of building, construction and related activities revert to five per cent.

The 2.5 per cent will however continue to be effective until the regulations are officially revoked via publication in the Federal Republic of Nigeria Official Gazette. The FIRS had early this year set a revenue target of N4.957 which it plans to generate in 2016.

According to the chairman, FIRS, Dr Tunde Fowler, the N4.957 trillion target for 2016 would be largely dependent on non-oil collection and in particular Value Added Tax (VAT) which will account for N2 trillion and Corporate Income Tax (CIT) expected to account for Nl.877 trillion.

The unstable price of crude oil in the international market has adversely affected the income of the country as oil accounts from more than 80 per cent of Nigeria’s revenue. Nigeria plans to borrow both locally and at the international market to fund its N2.2 trillion budget deficit.