THE Presidential Fiscal Policy and Tax Reforms Committee has issued a detailed response to observations made by global consultancy firm KPMG on Nigeria’s newly enacted tax laws, rejecting what it described as widespread misinterpretation, mischaracterisation of policy intent, and the presentation of preferences as factual errors.
In a statement sent to News Point Nigeria titled “Response to KPMG: Observations on Nigeria’s New Tax Laws,” the committee said while it welcomed constructive engagement and acknowledged that some of KPMG’s concerns particularly around implementation risks and clerical cross-referencing—were valid, the bulk of the firm’s analysis reflected a misunderstanding of deliberate policy choices underpinning the reforms.
The committee explained that many of the issues labelled as “errors,” “gaps,” or “omissions” were either incorrect conclusions by KPMG, matters taken out of context, or disagreements rooted in the firm’s preferred outcomes rather than flaws in the law itself.
According to the committee, disagreement with policy direction should not be framed as technical deficiencies, noting that other professional firms had engaged more productively through direct consultations that allowed for clarification and mutual learning.
Addressing concerns that new provisions on chargeable gains could trigger a sell-off in the stock market, the committee said such fears were unfounded. It clarified that the applicable tax rate on gains from shares is not a flat 30 percent but ranges from zero to a maximum of 30 percent, which will reduce to 25 percent.
It added that about 99 percent of investors are entitled to unconditional exemptions, while others qualify for relief subject to reinvestment. The committee pointed to the stock market’s record-high performance and increased capital inflows as evidence that investors understand the reforms will strengthen corporate fundamentals, profitability, and cash flow.
The committee also dismissed suggestions that the tax laws should commence strictly at the beginning of an accounting year, such as January 1, 2026. It described the proposal as overly simplistic, noting that a comprehensive tax overhaul involves complex transition issues cutting across multiple accounting periods, assessment bases, audits, deductions, credits, and penalties.
It stressed that a single commencement date would fail to address continuous transactions and other transition complexities inherent in large-scale reforms.
On the taxation of indirect share transfers, the committee said the provision aligns with global best practices and the Base Erosion and Profit Shifting (BEPS) framework. It explained that the measure is designed to close long-standing loopholes exploited by multinational companies and investors, not to undermine Nigeria’s competitiveness.
The claim that the policy could destabilise the economy, the committee said, was misleading and inconsistent with international tax norms.
The committee further clarified that insurance premiums are not taxable supplies under Nigerian VAT law, as they relate to risk transfer rather than the supply of goods or services. As such, it said a specific VAT exemption for insurance premiums was unnecessary and merely academic.
The response also addressed concerns about the inclusion of “community” in the definition of a taxable person, explaining that modern legislative drafting uses broad definitions to avoid repetition in charging sections. It noted that the approach mirrors how partnerships and executors are treated under the law.
On the composition of the Joint Revenue Board, the committee said its structure was intentional and designed to provide subnational revenue perspectives while complementing the fiscal policy mandate of the Ministry of Finance.
It further clarified distinctions in dividend treatment between foreign-controlled companies and Nigerian firms, stressing that dividends from foreign companies cannot be “franked” since Nigerian withholding tax is not deducted at source.
The committee rejected the notion that non-resident entities subject to final tax deductions should automatically be exempt from tax registration. It explained that filing obligations serve purposes beyond revenue generation, including compliance monitoring and transparency.
The committee strongly opposed suggestions to exempt foreign insurance firms from tax on premiums written in Nigeria, warning that such a move would unfairly disadvantage local insurers. It also defended the disallowance of tax deductions for foreign exchange purchases in the parallel market, describing it as a deliberate fiscal measure to support monetary policy, discourage round-tripping, and stabilise the naira.
Similarly, the linkage of tax deductibility to VAT compliance was described as an essential anti-avoidance tool aimed at promoting fairness and voluntary compliance across the business ecosystem.
On personal income tax, the committee defended the top marginal rate of 25 percent for high earners, noting that effective tax rates could be lower due to pension contributions. It argued that Nigeria’s rates remain competitive when compared with other African countries and advanced economies, and that the policy balances fairness, progressivity, and economic growth.
The committee also accused KPMG of factual inaccuracies, including references to the Police Trust Fund, which it said expired in June 2025 following the completion of its six-year lifespan. It added that concerns about small company tax exemptions predated the new laws and were introduced under the Finance Act 2021.
According to the committee, KPMG failed to adequately highlight key structural improvements under the new tax regime, including tax harmonisation, reduced corporate tax rates, 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.
The committee said the tax reforms were the product of extensive stakeholder consultations and a transparent legislative process that included public hearings and opportunities for technical input from local and international firms.
While acknowledging that clerical or cross-referencing issues may arise in any major reform, it said such matters were already being addressed. The committee urged stakeholders to move beyond static criticism and engage dynamically with government to support effective implementation.
It concluded that the success of the new tax laws would depend on administrative guidance, regulatory clarity, and constructive partnerships aimed at building a self-sustaining, competitive Nigerian economy.