Amanze Chinonye
The Presidential Fiscal Policy and Tax Reforms Committee has issued a detailed response to a recent critique by professional services firm KPMG on Nigeria’s newly implemented tax laws, arguing that most of the concerns raised reflect differences in policy preference rather than genuine legislative errors, Prime Business Africa reports.
In a statement addressing KPMG’s analysis of the Nigeria Tax Act 2025 and related laws, which took effect on January 1, 2026, the committee acknowledged that some clerical and cross-referencing issues exist but said these are already being identified and addressed internally. It maintained, however, that the majority of KPMG’s observations stem from a misunderstanding of the reforms’ policy intent.
According to the committee, disagreements over policy direction should not be presented as gaps or omissions in the law. It said other professional firms engaged more constructively by seeking clarifications during consultations, rather than framing policy choices as technical defects.
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Capital markets and share taxation
Responding to concerns that the new capital gains provisions could trigger instability in the stock market, the committee clarified that gains on shares are not subject to a flat 30 per cent tax rate. Instead, the framework applies rates ranging from zero to a maximum of 30 per cent, which is set to reduce to 25 per cent. It added that about 99 per cent of investors qualify for unconditional exemptions, while others benefit from reinvestment reliefs.
The committee cited strong market performance and increased investment flows as evidence that investors have not been deterred by the reforms, dismissing claims of an imminent sell-off as unsubstantiated.
Indirect transfers and global standards
On the taxation of indirect transfers of shares, the committee said the provision aligns with international best practices and the OECD’s Base Erosion and Profit Shifting (BEPS) framework. It described the measure as a necessary step to close long-standing loopholes used by multinational companies, rejecting suggestions that it could undermine Nigeria’s economic competitiveness.
VAT, insurance, and definitions
The committee also rejected KPMG’s call for a specific VAT exemption on insurance premiums, noting that insurance premiums are not classified as taxable supplies under Nigerian law. As such, it said, an explicit exemption is unnecessary.
Concerns about the inclusion of “community” in the definition of a taxable person were similarly dismissed. The committee explained that statutory definitions apply across legislation unless the context requires otherwise, adding that this drafting approach is consistent with modern legislative practice.
Non-resident taxation and compliance
Addressing issues around non-resident taxation, the committee clarified that the deduction of withholding tax as a final tax does not automatically exempt non-residents from registration or filing obligations. It said tax returns serve broader compliance and regulatory purposes beyond revenue collection.
The government also defended restrictions on deducting foreign exchange costs incurred through the parallel market, describing the measure as a deliberate fiscal policy choice aimed at discouraging currency arbitrage, stabilising the naira, and aligning tax policy with monetary objectives.
Personal income tax and progressivity
On personal income tax, the committee rejected claims that the new rates are oppressive. It said the top marginal rate of 25 per cent is competitive by international standards and that pension contributions can significantly reduce effective tax rates for high-income earners.
The policy, it added, is designed to improve fairness while reducing the tax burden on businesses through a planned cut in corporate tax rates.
Disputed factual claims
The committee accused KPMG of including factual inaccuracies in its analysis, pointing to references to the Nigeria Police Trust Fund levy, which expired in June 2025, and concerns about small-company tax exemptions that predate the 2026 reforms.
What the government says was overlooked
According to the committee, KPMG’s assessment failed to give adequate weight to key reform benefits, including tax harmonisation, expanded VAT input credits, exemptions for low-income earners and small businesses, the elimination of minimum tax on turnover and capital, and improved incentives for priority sectors.
Call for engagement
The committee said the tax reforms followed extensive stakeholder consultations and public hearings, stressing that minor technical issues are inevitable in a comprehensive overhaul of a national tax system.
It called on stakeholders to move from what it described as “static critique” to constructive engagement, noting that effective implementation will rely on administrative guidance, regulatory clarifications, and ongoing collaboration.
Overall, the government said the new tax laws represent a major step toward building a more competitive, investment-friendly, and self-sustaining Nigerian economy, with outstanding issues to be resolved through implementation frameworks and future amendments.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
