Nigeria’s Presidential Fiscal Policy and Tax Reforms Committee has pushed back against criticisms of the country’s new tax laws, arguing that many of the issues raised by KPMG Nigeria reflect misunderstandings of policy intent rather than genuine gaps or errors in the legislation.
In a detailed response to KPMG’s analysis titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” the committee acknowledged that some observations relating to implementation risks and clerical cross-referencing issues were valid. However, it said the bulk of the publication mischaracterised deliberate policy choices as technical flaws.
According to the committee, disagreements over policy direction should not be framed as legislative errors. “While it is legitimate to disagree with policy direction, disagreements should not be presented as gaps or omissions,” the committee said, adding that other professional firms had engaged directly with the government during the reform process to clarify concerns.
Capital gains and stock market fears
One of the central points of concern relates to capital gains taxation on shares. KPMG had warned that the new framework could trigger sell-offs in the equities market, particularly in a high-inflation environment.
Read also: KPMG flags “errors, inconsistencies, gaps and omission” in Nigeria’s new tax law
The committee rejected this view, noting that the tax rate on share gains is not a flat 30 percent. Instead, it is structured on a progressive scale from 0 percent to a maximum of 30 percent, which is expected to fall to 25 percent. It added that about 99 percent of investors qualify for unconditional exemptions, while others may benefit from reinvestment reliefs.
It also argued that the stock market’s strong performance, with record highs and sustained inflows, contradicts claims that the new tax rules undermine investor confidence.
According to the committee, disposals ahead of the new regime would still benefit from reinvestment exemptions or enhanced deductions, weakening the sell-off narrative.
Indirect transfers and global alignment
The committee defended the inclusion of indirect transfer taxation, describing it as a deliberate policy choice aligned with global best practices and Base Erosion and Profit Shifting (BEPS) initiatives.
It said the provision was introduced to close a long-standing loophole exploited in cross-border transactions, rather than to discourage foreign investment. Claims that the rule could threaten economic stability were described as “disingenuous.”
Foreign exchange deductions and VAT enforcement
On foreign exchange, the committee addressed criticism of the rule disallowing deductions for the premium paid when FX is sourced outside official markets. It described this as a conscious fiscal policy choice designed to complement monetary policy and stabilise the naira.
By removing tax incentives for parallel market FX purchases, the policy aims to curb round-tripping and redirect legitimate demand to official channels, the committee said.
Similarly, it defended the provision linking expense deductibility to VAT compliance, describing it as an anti-avoidance measure. The rule, it said, prevents businesses from benefiting by patronising suppliers who evade VAT and encourages voluntary compliance across the value chain.
Non-resident taxation and registration
The committee also rejected the view that non-resident companies whose income is subject to final withholding tax should automatically be exempt from registration and filing obligations.
It clarified that while passive income may be conditionally exempt, withholding tax on non-passive income does not remove broader compliance obligations. It added that filing requirements serve purposes beyond revenue collection, including transparency and data integrity.
Addressing alleged errors
Some issues raised by KPMG were dismissed outright. The committee noted that the Police Trust Fund Act expired in June 2025, making calls for its repeal redundant. It also said concerns around small company tax exemptions predate the new tax laws, having been introduced under the Finance Act 2021.
On VAT and insurance premiums, the committee said insurance does not constitute a taxable supply under the law, making calls for a specific exemption unnecessary.
What the committee says was overlooked…
Beyond rebutting criticisms, the committee said KPMG’s analysis failed to highlight key structural improvements in the new tax regime. These include the potential reduction in corporate income tax from 30 percent to 25 percent, expanded input VAT credits, exemptions for low-income earners and small businesses, the elimination of minimum tax on turnover and capital, and improved incentives for priority sectors.
Implementation remains key
The committee emphasised that the reforms followed extensive consultations and public hearings, and acknowledged that minor clerical inconsistencies may arise in any comprehensive overhaul.
It said the effectiveness of the new tax laws will ultimately depend on administrative guidance, regulations, and clarifications from tax authorities, while urging stakeholders to move from “static critique to dynamic engagement” in implementing the reforms.
