Tax Reform Committee Faults KPMG Report, Defends Nigeria’s New Tax Laws

Tax Reform Committee Faults KPMG Report, Defends Nigeria’s New Tax Laws
The Committee warned that disagreement with policy direction should not be framed as legislative error
The Committee warned that some of KPMG’s recommendations would undermine key reform objectives

The Presidential Fiscal Policy and Tax Reforms Committee has rejected major aspects of a recent analysis by KPMG on Nigeria’s new tax laws, saying the report largely reflects a misunderstanding of policy intent, mischaracterisation of deliberate reform choices, and the presentation of opinions as established facts.

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Eko Hot Blog reports that in a statement titled “Response to KPMG: Observations on Nigeria’s New Tax Laws,” the Committee acknowledged that some implementation risks, as well as clerical and cross-referencing issues highlighted by KPMG, are valid and already being addressed.

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However, it stressed that most of the issues described as errors, gaps or omissions are the result of incorrect conclusions, inadequate appreciation of the broader reform objectives, or preferences for alternative policy outcomes rather than actual defects in the legislation.

The Committee warned that disagreement with policy direction should not be framed as legislative error, noting that several professional firms engaged constructively with government through consultations that allowed for clarification and mutual understanding, rather than public mischaracterisation of intentional policy decisions.

Addressing taxation of shares and stock market transactions, the Committee clarified that the new capital gains framework does not impose a flat 30 per cent tax as suggested by KPMG. Instead, it operates on a graduated scale from 0 per cent to a maximum of 30 per cent, which is scheduled to reduce to 25 per cent.

It added that about 99 per cent of investors qualify for unconditional exemptions, while others may benefit through reinvestment provisions. According to the Committee, the strong performance of the stock market and increased investment inflows indicate that investors understand the reforms will enhance corporate profitability and cash flows.

On the commencement date of the new tax laws, the Committee rejected proposals to align implementation strictly with accounting periods such as January 1, 2026, explaining that the scale of the reforms affects multiple assessment bases, audit cycles, deductions, credits and penalties across different periods, making a single start date impractical.

The Committee also defended the provision on taxation of indirect transfers of shares, describing it as a globally accepted practice aligned with international standards and the OECD’s Base Erosion and Profit Shifting framework. It said the measure is designed to close long-standing loopholes exploited by multinational companies and poses no threat to Nigeria’s competitiveness or economic stability.

Tax Reform Committee Faults KPMG Report, Defends Nigeria’s New Tax Laws

On Value Added Tax (VAT) treatment of insurance premiums, the Committee explained that insurance does not constitute a taxable supply under Nigerian tax law, as it involves risk transfer rather than the supply of goods or services. It therefore described calls for a specific VAT exemption as unnecessary, noting that the legal and administrative position has always been clear.

Responding to what it described as misinterpretations, the Committee said the inclusion of “community” in the definition of a taxable person does not create ambiguity, as statutory definitions apply wherever the defined term appears unless the context dictates otherwise. It added that the structure and mandate of the Joint Revenue Board were deliberately designed to ensure subnational revenue representation and remain consistent with the former Joint Tax Board framework.

Clarifying dividend treatment, the Committee noted that dividends paid by foreign companies cannot be franked because no Nigerian withholding tax would have been deducted. It added that exemptions for foreign-sourced income repatriated through approved channels are deliberate policy choices reflecting fundamental differences between the tax treatment of Nigerian and foreign companies.

On non-resident taxation, the Committee rejected the view that deduction of tax at source removes the obligation to register or file returns, explaining that tax filing serves broader regulatory and compliance purposes beyond revenue collection.

The Committee warned that some of KPMG’s recommendations would undermine key reform objectives, including proposals that would exempt foreign insurance companies from tax on premiums earned in Nigeria while local firms remain taxable, a move it said would distort competition and weaken the domestic insurance industry.

It also defended the disallowance of tax deductions for foreign exchange purchased in the parallel market above official rates, describing it as a deliberate fiscal tool to support monetary policy and stabilise the naira.

On personal income tax, the Committee said the top marginal rate of 25 per cent for high earners is internationally competitive and consistent with the reform objective of fairness.

It noted that effective tax rates can be significantly reduced through pension contributions and compared Nigeria’s rates favourably with those of several African and developed economies.

The Committee further pointed out factual errors in KPMG’s report, including references to the Police Trust Fund, which expired in June 2025, and concerns about small company tax thresholds that predate the new tax laws, having been introduced under the Finance Act 2021.

According to the Committee, the report also failed to adequately recognise major structural gains from the reforms, including tax simplification and harmonisation, reduction in corporate income tax, expanded VAT input credits, exemptions for low-income earners and small businesses, elimination of minimum tax on turnover and capital, and improved investment incentives for priority sectors.

It concluded that the tax reforms were the result of extensive stakeholder engagement and public hearings, adding that any remaining clerical inconsistencies are being addressed through administrative guidance and regulations.

The Committee urged stakeholders to adopt constructive engagement to ensure effective implementation, describing the reforms as a bold step toward a self-sustaining and globally competitive Nigerian economy.