By Peter Omopo
The Presidential Fiscal Policy and Tax Reforms Committee has dismissed key aspects of a recent KPMG publication reviewing Nigeria’s newly enacted tax laws, arguing that the report misinterpreted policy intentions and conflated professional opinion with factual analysis.
In a formal response titled “Response to KPMG: Observations on Nigeria’s New Tax Laws,” the committee’s chairman, Taiwo Oyedele, acknowledged that the consulting firm raised some useful concerns, particularly around implementation risks and clerical or cross-referencing issues. However, he said much of the analysis failed to situate the reforms within their broader fiscal and economic context.
Oyedele said several issues described by KPMG as “errors,” “gaps,” or “omissions” stemmed from partial understanding, incorrect conclusions, or a failure to appreciate the underlying policy rationale. According to him, some criticisms reflected preferences for alternative policy outcomes rather than genuine defects in the legislation.
He cautioned that disagreement with policy direction should not be presented as technical mistakes, noting that other professional firms had opted for direct engagement with policymakers to seek clarification and promote shared understanding.
Emphasising that the tax laws embody deliberate policy choices aimed at achieving specific reform objectives, Oyedele said it was important to distinguish between such choices and recommendations that merely mirror the views of external advisers.
Addressing concerns about the taxation of shares and potential impacts on the capital market, Oyedele rejected claims that the new chargeable gains provisions would trigger a sell-off. He clarified that the tax on gains from shares is not a flat 30 per cent, but ranges from zero to a maximum of 30 per cent, with plans to reduce the top rate to 25 per cent.
He added that about 99 per cent of investors qualify for unconditional exemption, while others may benefit subject to reinvestment. According to him, the stock market’s current performance—at an all-time high with increased investment inflows—demonstrates investor confidence in the reforms. He described predictions of a market sell-off as unsupported by evidence.
On the commencement date of the new laws, Oyedele argued that proposals to align implementation strictly with the start of an accounting period underestimated the complexity of comprehensive tax reform. He said the changes affect multiple assessment bases, audit timelines, deductions, credits, and penalties, making a single commencement date impractical without unresolved transition issues.
He also defended provisions on the indirect transfer of shares, describing them as consistent with global best practice and international efforts to curb base erosion and profit shifting. The provisions, he said, were designed to close a long-standing loophole exploited by multinational companies, not to weaken Nigeria’s competitiveness. Claims that the measures could threaten economic stability were described as misleading.
On value added tax (VAT), Oyedele said calls for an explicit exemption for insurance premiums were unnecessary, noting that insurance premiums do not constitute a taxable supply under Nigerian law. He explained that insurance involves risk transfer rather than the supply of goods or services subject to VAT, adding that this has long been the legal and administrative position.
Responding to concerns about the inclusion of “community” in the definition of a taxable person, Oyedele said the drafting approach followed modern legislative practice. He explained that statutory definitions apply wherever a term is used unless context dictates otherwise, and that broad definitions help reduce repetition and simplify operative provisions.
He further defended the composition of the Joint Revenue Board, saying its revenue-focused membership was intentional and designed to incorporate subnational tax perspectives that complement the Ministry of Finance’s fiscal policy role. He noted that the structure mirrors the former Joint Tax Board, which operated effectively.
Clarifying issues around dividend taxation, Oyedele said KPMG appeared to confuse foreign-controlled companies with the foreign operations of Nigerian companies. He explained that dividends from foreign companies cannot be franked because no Nigerian withholding tax would have been deducted, and that the differing treatment of dividends from Nigerian and foreign companies reflects a deliberate policy choice.
On non-resident taxation, he said the assumption that final withholding tax eliminates registration or filing obligations misunderstood tax administration. According to him, filing requirements apply even where tax has been finally deducted, for both residents and non-residents, as returns serve compliance and information purposes beyond revenue collection.
Oyedele also rejected proposals he said would undermine core reform objectives, including suggestions to exempt foreign insurance companies from tax on premiums written in Nigeria, warning that such measures would disadvantage local insurers.
He defended the denial of tax deductions for foreign exchange sourced from the parallel market at rates above the official window, describing it as a fiscal measure aligned with monetary policy to deter round-tripping and support naira stability. He also said linking expense deductibility to VAT compliance was an anti-avoidance measure aimed at eliminating unfair advantages enjoyed by businesses dealing with VAT-evading suppliers.
On personal income tax, Oyedele said criticism of the 25 per cent top marginal rate failed to account for pension contributions and other reliefs that could significantly reduce effective tax rates for high earners. He said the rate compares favourably with those in several African countries and advanced economies, and that the structure balances fairness with competitiveness.
He also pointed out factual inaccuracies in the KPMG analysis, including references to the Police Trust Fund, which he said expired in June 2025 after completing its six-year statutory lifespan. He added that concerns about the impact of small company tax exemptions on larger firms predated the new laws, as relevant thresholds were introduced under the Finance Act 2021.
According to Oyedele, the publication overlooked key structural improvements introduced by the reforms, including tax simplification and harmonisation, a planned reduction of corporate tax to 25 per cent, expanded input VAT credits, exemptions for low-income earners and small businesses, the removal of minimum tax on turnover and capital, and stronger investment incentives for priority sectors.
He said the reforms followed extensive consultations and a transparent legislative process that included public hearings and opportunities for professional input. While acknowledging that clerical inconsistencies can occur in wide-ranging reforms, he said such issues were already being addressed.
“The success of the new tax laws now depends largely on administrative guidance, clarifications from the tax authority and supporting regulations, pending future amendments,” Oyedele said.
He urged stakeholders to move beyond static criticism and adopt a more collaborative approach to support effective implementation and advance Nigeria’s goal of building a self-sustaining and competitive economy.
