The Presidential Fiscal Policy and Tax Reforms Committee has issued a detailed response to observations by KPMG on Nigeria’s newly enacted tax laws (effective January 1, 2026), dismissing the majority of the firm’s identified “errors,” “gaps,” or “omissions” as stemming from misunderstandings, invalid conclusions, lack of broader reform context, or preferences presented as facts rather than actual legislative flaws.
In the statement titled “Response to KPMG: Observations on Nigeria’s New Tax Laws”, the committee welcomed constructive perspectives to aid successful implementation but acknowledged only a few points—mainly related to implementation risks and minor clerical or cross-referencing issues—as useful. It emphasized that disagreements with policy direction should not be framed as technical defects.
Key Defenses on Policy Choices and Clarifications:
Taxation of Shares and Stock Market Impact
The committee refuted claims that the new chargeable gains provisions would trigger a sell-off, noting the tax rate on share gains is tiered from 0% to a maximum of 30% (set to reduce to 25%), with 99% of investors qualifying for unconditional exemption and others via reinvestment. It highlighted the stock market’s all-time high performance and increased investment flows as evidence that investors recognize long-term benefits for firm profitability and cash flows. Any December 2025 disposals would have benefited from reinvestment exemptions or enhanced deductions.
Commencement Date and Transition
Suggestions to align commencement strictly with the start of accounting periods (e.g., January 1, 2026) were described as narrow, ignoring complex transition matters across multiple periods, assessment bases, audits, deductions, credits, and penalties. The committee stated such a “gold standard” approach fails to address continuous transactions.
Indirect Transfer of Shares
The provision aligns with global best practices and BEPS initiatives to close tax loopholes exploited by multinationals, not to harm competitiveness. Claims of threats to economic stability were called disingenuous.
VAT on Insurance Premiums
A specific exemption is unnecessary, as insurance premiums are not a “taxable supply” under the Nigeria Tax Act (they involve risk transfer, not goods/services). This has been the longstanding administrative and legal position—“If it is not broken, don’t fix it.”
Points Reflecting KPMG Misunderstandings:
Inclusion of “community” in the definition of “person” (but not explicitly in charging sections) creates no gap, as statutory definitions apply throughout unless context requires otherwise, consistent with modern drafting principles.
The Joint Revenue Board (JRB) composition is intentional, focusing on revenue agencies to provide subnational perspectives complementing the Ministry of Finance.
Dividend treatment distinctions arise from fundamental differences (e.g., foreign dividends cannot be “franked” without Nigerian WHT).
Non-resident registration is not automatically exempted for final tax deductions on non-passive income, as returns serve broader compliance purposes.
Proposals by KPMG That Could Undermine Reforms:
The committee rejected ideas such as exempting foreign insurers from tax on Nigerian premiums (harming local firms), allowing parallel market FX deductions (undermining Naira stability), and non-VAT-linked deductibility (weakening anti-avoidance).
On Progressive Personal Income Tax:
The top marginal rate of 25% (effective ~22% with pension contributions) is competitive compared to Angola (25%), Egypt (27.5%), Ghana (35%), Kenya (35%), U.S. Federal (37%), South Africa (45%), and U.K. (45%). It promotes fairness without stifling growth, balancing higher rates for high earners with corporate tax reductions.
Factual Errors Attributed to KPMG:
The Police Trust Fund expired in June 2025 (six-year lifespan from 2019), making repeal calls needless.
Small company tax exemption issues predate the new laws (introduced in Finance Act 2021).
What KPMG Overlooked:
The committee noted the reforms’ major benefits, including tax simplification and harmonisation, corporate tax reduction from 30% to 25%, expanded input VAT credits, exemptions for low-income earners and small businesses, elimination of minimum tax on turnover/capital, and enhanced incentives for priority sectors.
Conclusion and Way Forward:
The reforms resulted from extensive stakeholder consultations and legislative processes with public hearings. While clerical issues may arise in major overhauls, they are being addressed internally. Success now relies on administrative guidance, clarifications, and regulations. The committee urged stakeholders to move from static critique to dynamic engagement for productive partnership in building a self-sustaining, competitive Nigeria.
FG Defends New Tax Laws: Rejects KPMG’s ‘Errors’ Claims, Calls Most Concerns Misunderstandings of Deliberate Policy Choices
