The Presidential Fiscal Policy and Tax Reforms Committee has rejected most of the observations made by KPMG on Nigeria’s newly enacted tax laws, describing the advisory firm’s conclusions as largely flawed and based on misinterpretation.
The committee, chaired by renowned tax expert Taiwo Oyedele, conveyed its position in a response issued on Saturday to KPMG’s observations on the new tax regime.
Pinnacle Daily reported on Thursday, January 8, that KPMG, in a report titled ‘Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions’, outlined what it described as “errors”, “gaps”, or “omissions” in the laws, warning that some provisions could create legal uncertainty.
Reacting, the committee stated that a significant number of the issues highlighted by KPMG were either errors attributable to the firm itself, invalid conclusions, or matters not properly understood.
It argued that several of the observations reflected a failure to appreciate the broader objectives of the reforms or differences in policy preference rather than actual flaws in the legislation.
The committee also dismissed some of the points raised as clerical or editorial issues that had already been identified internally.
“We welcome all perspectives that contribute to a shared understanding and successful implementation of the new tax laws.
“We acknowledge that a few points raised by KPMG are useful, particularly where they relate to implementation risks and clerical or cross-referencing issues.
“However, the majority of the publication reflected a misunderstanding of the policy intent, a mischaracterisation of deliberate policy choices, and, in several instances, repetitions and presentation of opinion and preferences as facts,” the tax committee said.
It emphasised that while disagreement with policy direction is legitimate, such differences should not be presented as errors or gaps in the law.
The committee added that KPMG would have been more effective had it engaged directly, as other professional firms did, to allow for clarification and mutual learning.
“It is equally important to distinguish between policy choices designed to achieve the reform objectives and proposals that merely represent a firm’s preference,” the committee maintained.
Policy choices and reform clarity
Addressing concerns over the taxation of shares and the stock market, the committee dismissed fears that the new chargeable gains provisions would trigger a market sell-off.
It clarified that the tax on share gains is not a flat 30 per cent but ranges from zero to a maximum of 30 per cent, with a planned reduction to 25 per cent.
It noted that about 99 per cent of investors are entitled to unconditional exemptions, while others may qualify subject to reinvestment.
According to the committee, the stock market’s record-high performance and increased investment inflows demonstrate that investors understand the reforms will strengthen corporate profitability and cash flows.
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It added that claims of sell-offs were unsubstantiated, particularly as disposals in December 2025 would have benefited from reinvestment exemptions or enhanced deductions.
On the commencement date of the new tax laws, the committee rejected suggestions that implementation should align strictly with the start of an accounting period, such as January 1, 2026.
It argued that comprehensive tax reforms affect multiple assessment bases, audit processes, deductions, credits, and penalties across different periods, making a single-date approach inadequate.
As such, it said KPMG’s proposal could not be regarded as a universal “gold standard”.
The committee also defended provisions on the indirect transfer of shares, describing them as aligned with global best practices and BEPS initiatives.
It stated that the policy aims to close long-standing loopholes exploited by multinationals, not to undermine competitiveness, and added that claims about threats to economic stability were misleading.
Similarly, it described KPMG’s call for a specific VAT exemption on insurance premiums as unnecessary, explaining that insurance premiums are not considered taxable supplies under Nigerian tax law.
Since insurance relates to risk transfer rather than the supply of goods or services, the committee said the issue was academic.
Alleged misunderstandings by KPMG
The committee further addressed concerns over the inclusion of “community” in the definition of a taxable person, noting that statutory definitions apply throughout the law unless context dictates otherwise.
It explained that this drafting approach is consistent with modern legislative principles and does not constitute a gap or ambiguity.
On the composition of the Joint Revenue Board, the committee said its structure and mandate were deliberate, designed to provide subnational revenue perspectives that complement federal fiscal policy.
It noted that the board’s revenue-focused membership mirrors the structure under which the former Joint Tax Board operated effectively.
The committee also clarified distinctions in dividend treatment, stating that dividends from foreign companies cannot be franked because no Nigerian withholding tax is deducted.
It stressed that treating dividends from Nigerian and foreign companies differently is a deliberate and justified policy choice.
Regarding non-resident registration, it argued that the deduction of tax at source does not automatically exempt recipients from registration or filing obligations, noting that tax returns serve purposes beyond revenue collection.
Proposals seen as undermining reform goals
The committee rejected KPMG’s proposal to exempt foreign insurance companies from tax on premiums written in Nigeria, warning that such a move would disadvantage local insurers and distort competition.
It also defended the disallowance of tax deductions for foreign exchange purchased in the parallel market at rates above the official window, describing the policy as a deliberate fiscal measure to support monetary policy and stabilise the naira by discouraging round-tripping.
On VAT compliance, the committee said denying deductions for transactions where VAT was not charged is an anti-avoidance measure aimed at promoting fairness and voluntary compliance.
Addressing criticism of the progressive personal income tax structure, the committee argued that the top marginal rate of 25 per cent is competitive internationally and not oppressive.
It noted that effective rates could be lower through pension contributions and said the reforms balance progressivity with competitiveness while easing the tax burden on businesses.
Alleged errors and omissions
The committee dismissed KPMG’s reference to the Police Trust Fund, noting that the fund’s legal lifespan ended in June 2025, making calls for its repeal under the new tax law unnecessary.
It also stated that concerns over small company exemptions affecting larger firms predate the new tax laws, having been introduced under the Finance Act 2021, and should not be portrayed as new inconsistencies.
What KPMG failed to highlight
According to the committee, KPMG’s report overlooked major gains under the reforms, including tax simplification and harmonisation, a planned reduction in corporate tax rates, expanded VAT input credits, exemptions for low-income earners and small businesses, elimination of minimum tax on turnover and capital, and stronger incentives for priority sectors.
Conclusion and way forward
The committee reiterated that the reforms followed extensive stakeholder consultations and a transparent legislative process that included public hearings.
While acknowledging that clerical or cross-referencing issues may arise in a comprehensive overhaul, it said such matters are already being addressed.
Describing the reforms as a bold step toward a self-sustaining and competitive economy, the committee stressed that effective implementation would depend on administrative guidance, regulatory clarifications, and ongoing engagement.
“We urge all stakeholders to pivot from a static critique to a dynamic engagement model, which allows for clarifications and a productive partnership in the implementation of the new tax laws,” the tax committee added.
Alex is a business journalist cum data enthusiast with the Pinnacle Daily. He can be reached via ealex@thepinnacleng.com, @ehime_alex on X
