Tax Reforms Committee Counters KPMG Report, Defends New Tax Laws

The Presidential Fiscal Policy and Tax Reforms Committee has pushed back against elements of a recent KPMG publication reviewing the country’s newly enacted tax laws, saying the analysis misread policy intentions and blurred the line between opinion and fact.

In a detailed rebuttal titled “Response to KPMG: Observations on Nigeria’s New Tax Laws,” the committee’s chairman, Taiwo Oyedele, said although the consulting firm raised some useful points—particularly around implementation risks and clerical or cross-referencing issues much of its commentary failed to place the reforms within their wider fiscal and economic context.

Oyedele said several issues labelled by KPMG as “errors”, “gaps” or “omissions” were rooted in incorrect conclusions, partial understanding of the reforms, or a failure to appreciate the policy rationale. He added that some of the criticisms reflected preferences for alternative outcomes rather than actual defects in the law.

According to him, disagreement with policy direction should not be framed as technical mistakes, noting that other professional firms had taken a more constructive route by engaging policymakers directly to seek clarification and promote shared understanding.

He emphasised that the new tax laws embody deliberate policy choices aimed at achieving specific reform goals, and that it was essential to distinguish between such choices and recommendations that merely mirror the views of external advisers.

Responding to concerns over the taxation of shares and potential effects on the capital market, Oyedele rejected claims that the new chargeable gains provisions would spark a sell-off.

He clarified that the tax on gains from shares was not a flat 30 per cent, but ranged from zero to a maximum of 30 per cent, with plans for a reduction to 25 per cent.

He added that about 99 per cent of investors qualify for unconditional exemption, while others may benefit subject to reinvestment.

“The stock market is currently at an all-time high with increased investment flows, showing that investors understand that the reforms strengthen company fundamentals, profitability and cash flows,” he said, stressing that predictions of a market sell-off lacked evidence.

On the commencement date of the new laws, Oyedele argued that proposals to tie implementation strictly to the start of an accounting period overlooked the complexity of comprehensive tax reform.

He said the changes span multiple assessment bases, audit timelines, deductions, credits and penalties, making a single commencement date impractical without leaving transition issues unresolved.

He also defended provisions on the indirect transfer of shares, describing them as aligned with global best practice and international efforts to curb base erosion and profit shifting.

According to him, the aim was to close a long-standing loophole exploited by multinational companies and other investors, not to weaken Nigeria’s competitiveness. He described claims that the provision could threaten economic stability as misleading.

Addressing value added tax, Oyedele said calls for an explicit VAT exemption on insurance premiums were unnecessary, explaining that insurance premiums do not amount to a taxable supply under Nigerian law.

“Insurance is about risk transfer, not the supply of goods or services subject to VAT. This has always been the legal and administrative position,” he said.

On concerns about including “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 the context requires otherwise, adding that broad definitions 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 bring subnational tax perspectives that complement the Ministry of Finance’s fiscal policy role. He noted that the structure mirrored the former Joint Tax Board, which operated effectively.

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Clarifying dividend taxation, Oyedele said KPMG appeared to confuse foreign-controlled companies with foreign operations of Nigerian companies. He explained that dividends from foreign companies could not be franked because no Nigerian withholding tax would have been deducted, and that the differing treatment of dividends from Nigerian and foreign companies reflected a deliberate and logical policy choice.

On non-resident taxation, he said the assumption that final withholding tax automatically removes registration or filing obligations misunderstood the purpose of tax administration.

He noted that filing requirements apply even where tax has been finally deducted, for both residents and non-residents, as returns serve compliance and information functions beyond revenue collection.

Oyedele also took issue with proposals he said would undermine core reform objectives. He rejected suggestions to exempt foreign insurance companies from tax on premiums written in Nigeria, warning that such a move 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 tool aligned with monetary policy to deter round-tripping and support naira stability.

He further explained that linking expense deductibility to VAT compliance was an anti-avoidance measure designed to eliminate the advantage previously enjoyed by businesses dealing with VAT-evading suppliers. According to him, the rule promotes fairness and encourages voluntary compliance, especially given provisions that allow for self-charging of VAT.

On personal income tax, Oyedele said criticism of the 25 per cent top marginal rate ignored the impact of pension contributions and other reliefs, which could significantly lower effective tax rates for high earners.

He said the rate compared favourably with those in several African countries and advanced economies, adding that the structure promotes fairness without undermining competitiveness. He noted that higher rates for top earners combined with lower corporate tax were intended to ease the burden of business formalisation.

He also pointed out factual inaccuracies in KPMG’s analysis, including references to the Police Trust Fund, which he said expired in June 2025 at the end of its six-year statutory lifespan.

He added that concerns about the effect of small company tax exemptions on larger firms predated the new laws, as the relevant thresholds were introduced under the Finance Act 2021.

Oyedele said the publication overlooked major structural improvements introduced by the reforms, including tax simplification and harmonisation, the 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 featured public hearings and opportunities for professional input. While acknowledging that clerical inconsistencies can arise in sweeping reforms, he said such issues were already being addressed internally.

“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 that supports effective implementation and advances Nigeria’s ambition of building a self-sustaining and competitive economy.