The Federal Government has responded to a recent publication by KPMG on Nigeria’s newly enacted tax laws, saying much of the firm’s analysis reflects a misunderstanding of policy intent rather than genuine errors in the legislation.
In a detailed statement issued by the Presidential Fiscal Policy and Tax Reforms Committee, the government said it welcomed professional feedback on the reforms, particularly observations related to implementation risks and clerical issues. However, it argued that most of KPMG’s claims were based on mis-characterisations of deliberate policy choices, invalid conclusions, or preferences presented as factual gaps.
According to the committee, disagreements over policy direction should not be framed as legislative errors. It noted that other professional firms had engaged constructively with government institutions to seek clarifications, rather than publishing critiques without sufficient contextual understanding.
Share Taxation and Market Impact
Addressing concerns over taxation of share disposals, the committee dismissed claims that the new rules could trigger a stock market sell-off. It clarified that the tax on chargeable gains is not a flat 30 per cent, but a graduated structure ranging from zero to a maximum of 30 per cent, with a planned reduction to 25 per cent.
The government said about 99 per cent of investors qualify for unconditional exemptions, while others benefit through reinvestment reliefs. It added that the strong performance of the capital market, currently at record highs, suggests investors understand that the reforms are designed to strengthen corporate profitability and cash flows.
Transition Provisions and Global Alignment
On the commencement date of the new laws, the committee rejected the suggestion that reforms should only begin at the start of an accounting period. It explained that wholesale tax reform affects transactions spanning multiple periods and assessment bases, making a single-date transition impractical.
The government also defended provisions on indirect transfer of shares, describing them as consistent with global best practices and Base Erosion and Profit Shifting (BEPS) standards. The measure, it said, is aimed at closing long-standing loopholes exploited by multinationals, not discouraging investment.
VAT, Insurance, and Institutional Design
The committee said calls for a specific VAT exemption on insurance premiums were unnecessary, noting that insurance premiums are not considered taxable supplies under Nigerian VAT law. It described the issue as academic rather than substantive.
It also clarified concerns about the definition of “community” in the law and the composition of the Joint Revenue Board, stressing that both reflect intentional drafting choices aligned with modern legislative standards and subnational revenue coordination.
Foreign Income, Registration, and Compliance
Responding to criticism over dividend treatment, the government drew a distinction between Nigerian companies and foreign entities, explaining that dividends from foreign companies cannot be “franked” because no Nigerian withholding tax is deducted.
On non-resident registration, it said the deduction of withholding tax does not automatically exempt a taxpayer from registration or filing obligations, noting that tax returns serve purposes beyond revenue collection.
Proposals the FG Rejects
The committee rejected KPMG’s proposal to exempt foreign insurance companies from tax on premiums generated in Nigeria, warning that such a move would disadvantage local firms. It also defended the disallowance of deductions for foreign exchange purchased at parallel market rates, describing it as a fiscal tool to complement monetary policy and stabilise the naira.
Similarly, linking VAT compliance to deductibility was described as an anti-avoidance measure aimed at promoting fairness and voluntary compliance across the tax system.
Personal Income Tax and Comparisons
While acknowledging KPMG’s concern about the top marginal personal income tax rate, the committee said the 25 per cent rate for high earners remains competitive internationally. It cited higher top rates in countries such as Ghana, Kenya, South Africa, the United Kingdom and the United States, arguing that Nigeria’s approach balances progressivity with competitiveness.
Errors and Omissions Alleged by KPMG
The government also pointed out what it described as factual errors in KPMG’s analysis, including references to the Police Trust Fund, which expired in June 2025, and concerns about small company thresholds that predate the new tax laws.
What the FG Says Was Ignored
According to the committee, KPMG’s review failed to highlight key gains of the reform, including tax simplification and harmonisation, a planned reduction in corporate tax from 30 to 25 per cent, expanded VAT input 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.
Way Forward
The committee said the tax reforms followed extensive stakeholder consultations and public hearings. While acknowledging that minor clerical issues may arise in any major legislative overhaul, it stressed that these are already being addressed administratively.
It urged stakeholders to move from “static critique” to active engagement, noting that the success of the new tax framework will depend on clear administrative guidance, regulatory support and constructive collaboration in implementation.
“The reform represents a bold step toward a self-sustaining and competitive Nigeria,” the statement said, calling for continued partnership to ensure its effective rollout across the economy.
