Flaws of the Withholding Tax System in Nigeria

The operation of WHT is not peculiar to Nigeria. It is a concept that has been adopted by many countries but subsequently scrapped by most countries. It has been used as a tax mechanism in the United States and United Kingdom as far back as the Second World War but only introduced into Nigeria's tax regime in 1977. In Nigeria, it is regulated by various income taxActs and the WHT Regulations. 

WHT was introduced in the Nigerian tax system to minimise the incidence of tax evasion, by ensuring that more persons are brought into the tax net through disclosure from the larger taxpayers to whom they supply goods or services. In this regard, it serves as a veritable means of gathering information of commercial activities carried out by both resident and non-resident taxpayers for statistical purposes and for formulating tax policy. It is also an efficient way of collecting tax on non-residents who may not have a strong nexus in Nigeria especially on investment income such as dividend, royalty and interest.