FG Responds After KPMG Exposes Errors, Gaps in New Tax Laws
- The Presidential Fiscal Policy and Tax Reforms Committee has responded to KPMG’s assessment of Nigeria’s new tax laws, in which the firm identified "errors and gaps"
- The committee said many issues raised by KPMG reflect misunderstandings or policy disagreements rather than actual errors
- It defended provisions on share taxation, VAT, indirect share transfers and personal income tax rates, while calling for continued stakeholder engagement
Oluwatobi Odeyinka is a business editor at Legit.ng, covering energy, the money market, technology and macroeconomic trends in Nigeria.
The federal government, through the Presidential Fiscal Policy and Tax Reforms Committee, has responded to claims of errors in Nigeria’s newly enacted tax laws made by the global professional services firm KPMG.
In a statement shared on X (formerly Twitter) by the committee chairman, Taiwo Oyedele, he argued that many of the issues raised by KPMG as “errors” and “gaps” stem from misunderstandings of policy intent rather than actual errors in the legislation.
Source: UGC
Oyedele acknowledged that some of KPMG’s comments were helpful, particularly those relating to implementation risks and minor clerical or cross-referencing matters. However, he stated that most of the points in the publication misrepresented deliberate policy choices or presented opinions and preferences as factual errors.
He stressed that several issues described by KPMG as “errors” or “omissions” fall into five broad categories: incorrect conclusions by the firm, poor understanding of the reforms, lack of context around broader policy objectives, disagreement with deliberate policy choices, and minor editorial issues already identified internally.
Stock market, transition dates and global practices
Addressing concerns about the taxation of shares, the committee clarified that the new law does not impose a flat 30% tax on share gains. Instead, rates range from 0% to a maximum of 30%, which will be reduced to 25%, with approximately 99% of investors qualifying for unconditional exemptions or reliefs tied to reinvestment.
It noted that the Nigerian stock market has continued to record strong performance and increased capital inflows, which, according to the committee, suggests investors understand the long-term benefits of the reforms.
On the commencement date of the new tax laws, the committee rejected the idea that reforms should automatically begin at the start of an accounting year, such as January 1, 2026. It explained that comprehensive tax reforms affect multiple assessment periods, audits, deductions and penalties, making a single-date transition impractical.
The committee also defended provisions on the taxation of indirect share transfers, describing them as consistent with global best practices and international efforts to curb tax avoidance. It said the measure targets long-standing loopholes exploited by multinationals and does not undermine Nigeria’s competitiveness.
“This is a common provision in international tax, and the assertion that it may affect the country's economic stability is disingenuous,” Oyedele stated.
Clarifications on VAT, dividends and registration
KPMG had pointed to what it described as an error in Section 17(3)(b) of the New Tax Act (NTA) relating to the taxation of non-resident individuals. The firm advised that Section 6(1) of the New Tax Administration Act (NTAA) should be revised to cover not only non-residents earning passive investment income in Nigeria, but also those whose income is subject to withholding at source as a final tax.
According to KPMG, such an amendment would remove any ambiguity by confirming that non-residents without a Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria are not required to register for tax.
However, the committee argued that the deduction of withholding tax as final tax does not automatically remove the obligation to register or file returns, as tax filings serve broader compliance and reporting purposes.
Responding to KPMG’s comment on VAT exemption for insurance premiums, the committee said insurance premiums are not taxable supplies under Nigerian law, making a specific exemption unnecessary.
It also clarified issues around the definition of “community” as a taxable person, the composition of the Joint Revenue Board, and the treatment of dividends from foreign and Nigerian companies, noting that these distinctions are intentional and aligned with established tax principles.
The statement noted:
“The concern about the inclusion of 'community' in the definition of a ‘person’ but its omission from the charging section does not constitute a gap or ambiguity. In statutory interpretation, definitions provided in the law apply wherever the defined term appears, unless the context requires otherwise. Hence, ‘person’ and ‘taxable person’ are used in the charging section, and both definitions include ‘community.’
“This approach is consistent with modern legislative drafting principles, which use comprehensive definitions to streamline operative provisions and avoid redundancy. This is similar to the inclusion of partnerships and executors in the definition, but not under the charging section. The use of the word “includes” further signifies that the list of taxable persons is not exhaustive.”
The committee noted that the composition and mandate of the Joint Revenue Board (JRB) are intentional, stating that the board’s policy advisory role is specifically to provide a subnational tax and revenue perspective that complements the fiscal policy mandate of the Ministry of Finance.
Source: UGC
Reforms aimed at fairness and competitiveness
The committee rejected KPMG’s proposal for the exemption of foreign insurance firms from taxes. It argued that such an exemption, while local companies pay the same tax, would harm domestic operators.
It also defended the disallowance of tax deductions tied to parallel market foreign exchange transactions, saying the policy supports efforts to stabilise the naira and discourage round-tripping.
It further justified linking tax deductibility to VAT compliance as an anti-avoidance measure designed to promote fairness and encourage responsible business practices.
Committee’s comments on income tax, benefits of reforms
KPMG had argued that while the tax offered reliefs to low-income earners, it aimed to overtax high-income earners.
However, the committee argued that the new top marginal rate of 25% for high earners remains competitive internationally and supports the broader goal of shifting the tax burden away from businesses and towards high-income individuals.
According to the statement, Oyedele noted that KPMG failed to highlight key benefits of the reforms, including simplified and harmonised taxes, a planned reduction in corporate income tax from 30% to 25%, expanded VAT input credits, exemptions for low-income earners and small businesses, and the removal of minimum tax on turnover and capital.
He concluded that while minor technical issues may arise in any major reform, these are being addressed through administrative guidance and future regulations.
He urged stakeholders to move from “static critique” to active engagement to support effective implementation of the new tax framework.
NLC calls for suspension of tax laws
Legit.ng earlier reported that the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) called for the suspension of the new tax laws, warning that the reforms could deepen economic hardship for workers
The Organised Labour in Nigeria argued that the laws were drafted without input from workers, describing them as regressive and unfair.
The NLC president, Joe Ajaero, cautioned that continuing with the implementation risked eroding public trust and undermining democratic principles
Source: Legit.ng
