How Osun Is Losing N10bn IGR Annually On Withholding Tax

By Babalola Wasiu

It is no more news that virtually all the states of the Federation have been on redirection towards revamping their revenue generation bases from solely relying on proceeds from the oil sector to taxes as the only reliable means of revenue generation. What is tax all about? We need to have an in-depth knowledge of what tax entails before dwelling on the core focus of this write up.

Tax by definition, is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures like: Infrastructure Projects, Public Security, Health Services among others.
Infrastructure: There is no gainsaying the fact that Government needs money to build roads, bridges and rebuilding of classes in public schools and a number of other projects which are available to the society as a whole.

Relying on government alone to fund these projects is no longer feasible, as a result of the dwindling revenue from government purse.

Public Security: Money collected from taxes goes a long way in securing lives and property of individuals and the citizenry. Security consumes a lot of money; hence a Trust Fund such as being practiced by the Lagos State Government would go a long way in securing lives and property. Private organizations as well as public spirited individuals could team up with the government through donations both in cash and equipment to actualize this dream. If lives and property are secured, people would be confident to embark on their daily livelihoods without any hindrance.

Health Services: Government sees it as her primary assignment to provide free or subsidized health service to its citizens. This may include preventive immunization shots, disaster relief and many others. All this and many more are funded by the tax money you and I pay. That is why it is incumbent on every individual who earns income as well as corporate entities to see tax payment as inevitable.

Tax is of various types depending on the scope of income operation. People have been accustomed to various types of taxes like: Income tax, company tax and value added tax just to mention a few, but unlike withholding tax, hardly do people know about it, even majority of the people that do pay withholding tax do not do it right especially with regards to the address of the recipient of such tax.

To expatiate on this, Withholding Tax is an Income Tax withheld from employees’ wages and paid directly to the government by the employer. It is a tax levied on income in the form of dividend, rents, interests, director’s fees, gambling winnings, commissions etc from securities owned by a non-resident.

The amount withheld is a credit against the income taxes the employee must pay during the year. And how this tax (withholding Tax) is paid to the state depends on the address that the tax payer used in his or her ‘Employee’s Withholding Allowance Certificate’.

Now, this is the area of concern. Based on the recently conducted research on Withholding Tax, tax on withholding that is due to the coffers of the state is being presently used to develop some states of the federation.

The state of Osun is losing revenue to the tune of Ten Billion Naira yearly as a result of non-remittance of withholding taxes of Osun indigenes transacting businesses in other states. This comes about, just because the various Osun indigenes in diaspora (I mean, taxpayers on withholding tax) did not use Osun address in their ‘Employee’s Withholding.

Babalola Wasiu is the Press Secretary, Osun Internal Revenue Service