Nigeria’s Tax Laws: Contextualising Presidential Fiscal Policy Committee’s rejoinder to KPMG’s observations

*Nigeria’s Presidential Fiscal Policy and Tax Reforms Committee appreciates KPMG’s observations, but clarifies how a significant proportion of the issues the advisory services firm raised and described as ‘errors, inconsistencies, gaps and omissions’ in the new tax laws are either the company’s ‘own errors and invalid conclusions, issues not properly understood by the firm, or missed context on broader reforms objectives’

Gbenga Kayode | ConsumerConnect

Sequel to its recent observations, Nigeria’s Presidential Fiscal Policy and Tax Reforms Committee has reacted to certain observations raised by KPMG, a global advisory services firm.

The Committee, in its comprehensive, explanatory responses said it actually welcomed “all perspectives that contribute to a shared understanding and successful implementation of the new tax laws.”

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It also acknowledged that a few points KPMG raised on the country’s new tax laws that took effect from January 1, 2026, “are useful, particularly where they relate to implementation risks and clerical or cross-referencing issues.”

What observations did KPMG make on Nigeria’s new tax laws?

ConsumerConnect reports KPMG identified what the organisation described as “errors, inconsistencies, gaps and omissions”, among others in the new tax laws, especially in new Nigeria Tax Act (NTA), one of the four newly-enacted tax laws.

The company, in its latest newsletter titled, “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions”, affirmed the potential of the tax laws to transform tax administration in the West African country.

The business advisory firm particularly identified shortfalls, which it opined needed urgent reconsideration in order to attain the stated objectives of President Bola Ahmed Tinubu administration’s tax reforms agenda in the Nigerian economy.

KPMG also urged the Presidential Fiscal Policy and Tax Reforms Committee cum the Federal Government to take action on controlled foreign companies, taxation of non-resident persons, imposition of tax, deductions allowed, and others.

Besides, the firm advocated the exclusion of Withholding Tax (WHT) on insurance premiums paid to non-residents.

On balancing revenue generation, sustainable growth

Citing an error/gap in Section 17(3) (b) of the NTA bordering on taxation of non-resident persons, KPMG recommended that Section 6(1) of the NTAA should be updated to include not only non-residents that derive passive income from investments in Nigeria, but also income in which the deduction at source is the final tax.

The firm said: “There are many provisions in these laws that will result in increased revenue for the government, if well implemented.

“However, there is always the need to strike a delicate balance between revenue generation and sustainable growth.”

KPMG further stated: “It is, therefore, critical that the government review the gaps, omissions, inconsistencies and lacunae highlighted in this Newsletter to ensure the attainment of the desired objectives.”

It equally observed that as with any tax reform, the new tax laws aimed to achieve equity and fairness; simplification and efficiency of tax administration; competitiveness; adapt to changing economic conditions; combat tax avoidance and tax evasion; improve revenue generation and stimulate economic growth in Nigeria.

Tax Committee: KPMG’s misunderstands tax policy intent, offers opinions and preferences as facts

Addressing the firm’s arguments and observations on the tax policy instruments point by point, the Presidential Tax Reforms Committee, though appreciated KPMG’s perspectives on the new laws, averred 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.

As regards the firm’s general observations, the Committee, a significant proportion of the issues described as “errors,” “gaps,” or “omissions” by KPMG are either the firm’s own errors and invalid conclusions; issues not properly understood by the firm; or missed context on broader reforms objectives.

It identified areas where KPMG preferred different outcomes than the choices Nigeria deliberately made in the new tax laws; and obvious clerical and editorial matters already identified internally.

The Committee further contended while it is legitimate to disagree with a policy direction, disagreements “should not be framed as errors or gaps.”

It stated that KPMG would have been more effective, if the firm had adopted a similar approach like other professional firms, who engaged directly, providing the opportunity for clarifications and mutual-learning in the tax policy formulation ecosystem.

The Presidential Fiscal Policy and Tax Reforms Committee restated that it was important to distinguish between policy choices designed to achieve the reforms objectives, and proposals that merely represent a firm’s preference.

Highlights of policy choices and clarity on reforms

1. Taxation of shares and the stock market

The Committee noted that contrary to the presumption that the new tax provisions on chargeable gains would trigger a sell-off on the stock market, the fact is that the applicable tax rate on share gains is not a flat 30 percent.

It explained the tax framework is structured from 0% to a maximum of 30%, which is set to reduce to 25%.

Furthermore, a significant majority of investors (99%) are entitled to unconditional exemption, with others qualifying subject to reinvestment.

According to the Committee, the market performance, which is at an all-time high with increased investment flow, “demonstrates investors understanding that the tax changes will enhance the fundamentals of firms both in terms of profitability and cash flows.

“The sell-off narrative is unsubstantiated as any disposals in December 2025 would have benefited from the re-investment exemption or enhanced deductions under the new law.”

2. Commencement date and transition

The Committee argued the suggestion to set the commencement date as the start of an accounting period (e.g., 1 January 2026) takes a narrow view of the complex transition issues.

A wholesale reform affects myriad issues beyond the accounting period, spanning multiple periods, different bases of assessment (preceding year, actual year), as well as issues related to audit, deductions, credits, and penalties.

Limiting the commencement to a single date for accounting periods would fail to address the intricacies of continuous transactions and other transition matters.

KPMG’s proposal is therefore, not a “gold standard” to be applied to all new laws as suggested.

3. Indirect transfer of shares

The new provision to tax indirect transfer of shares is a policy choice aligned with global best practices and BEPS initiatives. Its objective is to block a long-exploited tax loophole by multinationals and other investors, not to affect competitiveness. This is a common provision in international tax, and the assertion that it may affect the country’s economic stability is disingenuous.

4. VAT Exemption on insurance premium

KPMG’s point regarding a specific VAT exemption on insurance premium is technically unnecessary, as an insurance premium is not a “taxable supply” defined under the Nigeria Tax Act.

Insurance relates to risk transfer, not the supply of goods or services subject to VAT.

As this has always been the administrative and legal position, a specific amendment for exemption is academic. If it is not broken, don’t fix it.

On issues reflecting misunderstanding by KPMG

5. Inclusion of ‘community’ in definition

The concern about the inclusion of “community” in the definition of a ‘person’ but its omission from the charging section does not constitute a gap or ambiguity.

In statutory interpretation, definitions provided in the law apply wherever the defined term appears, unless the context requires otherwise. Hence, ‘person’ and ‘taxable person’ are used in the charging section, and both definitions include ‘community.’

This approach is consistent with modern legislative drafting principles, which use comprehensive definitions to streamline operative provisions and avoid redundancy.

This is similar to the inclusion of partnerships and executors in the definition but not under the charging section.

The use of the word “includes” further signifies that the list of taxable persons is not exhaustive.

6. Joint Revenue Board (JRB) composition

The Presidential Committee emphasised that the composition and mandate of the Joint Revenue Board (JRB), formerly christened Joint Tax Board, are intentional.

It stated that its policy advisory role is specifically to provide a subnational tax and revenue perspective that complements the fiscal policy mandate of the Federal Ministry of Finance.

The Committee also noted that its membership is appropriately limited to revenue-focused agencies, which is why it is called the Joint Revenue Board. “This is a similar composition under which the former JTB operated effectively, and its functions remain consistent with the need for inter-agency coordination,” it said.

7. Distinction in dividend treatment

KPMG’s analysis appears to mix the distinction between a foreign-controlled company and a foreign operation of a Nigerian company.

Dividends distributed by a foreign company cannot be “franked” since no Nigerian Withholding Tax (WHT) would have been deducted.

Section 162(1)(s) confers exemption on dividend, interest, rent, or royalty derived from outside Nigeria and brought into the country through approved channels.

The Committee stressed Nigeria’s “choice” to treat dividends distributed by Nigerian companies differently from foreign companies is a deliberate policy choice, as they are fundamentally different for tax purposes.

8. Non-Resident registration and final tax

The view that a payment subject to deduction as final tax should automatically exempt the Non-Resident recipient from tax registration misses a critical distinction.

While the law conditionally, exempts passive income from registration, the deduction of tax on non-passive income is not synonymous with an exemption from registration or filing of returns.

The same way that residents are required to file returns on income, such as interest (in the case of individuals) and dividend where WHT is final.

Returns serve a broader purpose beyond solely generating tax revenue, stated the Committee.

KPMG’s proposals that would undermine key reforms objectives

9. Tax on foreign insurance premiums

According to the Presidential Tax Committee, the proposal to exempt foreign insurance companies from tax on premiums from insurance written in Nigeria to deepen penetration, while local insurance companies continue to pay tax, would be detrimental to the domestic insurance sector.

This would create an unfair and harmful competitive disadvantage for local firms in their own market.

The Committee clarified the current policy is designed “to protect and promote local industry and ensure a level-playing field.”

10. Parallel market forex deduction

The new law, the Committee explained, disallows tax deduction for the difference where a business buys foreign exchange in the parallel market at a premium over the official rate.

This is a critical fiscal policy choice designed to complement monetary policy, strengthen, and stabilise the Naira.

By removing the tax subsidy for patronage of the parallel market, the policy aims to reduce incentives for round-tripping and redirect legitimate FX demands to the official market.

This is policy congruence, not an error, it clarified.

11. VAT compliance-linked deductibility

The non-tax deduction for taxable transactions on which VAT has not been charged is a necessary anti-avoidance measure.

It removes the advantage that some taxpayers previously enjoyed by patronising suppliers who evade VAT.

This is a matter of fairness, and is squarely within the control of a business to manage, especially given the provision for the self-charge of VAT.

It also ensures that responsible businesses play their part in promoting voluntary tax compliance across the ecosystem.

12. Progressive Personal Income Tax

The Committee said though KPMG acknowledges the reforms objective of fairness and progressivity, the firm disagrees with a top marginal tax rate of 25% for the highest earners.

In reality, the effective tax rate can be as low as 22% for an individual earning billions a year simply by contributing 10% to pension.

This rate is competitive when compared to many other countries, including Angola 25%, Egypt 27.5%, Ghana 35%, Kenya 35%, the U.S. (Federal) 37%, South Africa 45%, and the U.K. 45%.

So, the rate is not “oppressive” or one that will negatively affect economic growth as claimed; rather it ensures progressivity without compromising competitiveness, it noted.

According to the Committee, from a broader policy objective perspective, the increase in top marginal rate for high income earners and the reduction in corporate tax rate is designed to address the existing higher tax burden associated with business formalisation.

False inclusion and factual error by KPMG

13. Police Trust Fund

The Police Trust Fund was signed into law May 24, 2019, with a six-year lifespan under Section 2(2) of the Act, which ended June 2025.

Therefore, KPMG’s point that the new tax law should be amended to repeal the taxing section of the Police Trust Fund Act is needless, as the provision no longer exists.

14. Small company verification

The analysis concerning the tax exemptions for small companies affecting large companies’ obligations is not a new issue or an inconsistency in the new law.

The small business threshold was introduced via the Finance Act 2021. This issue pre-dates the current tax laws and should not be presented as an error or omission simply by virtue of a higher tax exemption threshold under the new law.

What KPMG left out, by Presidential Tax Committee

While acknowledging the objectives of the reforms, the Committee said KPMG could have highlighted the major structural improvements under the new laws, including:

– simplification and tax harmonisation,

– the scope for reduction in corporate tax rate from 30% to 25%,

– expanded input VAT credits for businesses,

– tax exemption for low-income earners and small businesses,

– elimination of minimum tax on turnover and capital, and

– improved investment incentives for priority sectors.

It further argued that a balanced assessment by KPMG would have recognised these transformative elements, among others.

The way forward

The Presidential Tax Reforms Committee said the Nigerian tax reforms resulted from an extensive consultation with various stakeholder groups in addition to the legislative process.

It restated the process included widely publicised public hearings, avenues intended for all stakeholders, including international firms to provide technical expertise at the formative stage.

It stated that in any comprehensive overhaul of a country’s tax framework, “clerical inconsistencies or cross-referencing gaps may occur, and these are already being identified within the government.”

The tax reform represents a bold step towards a self-sustaining and competitive Nigeria, it averred.

According to the Committee, an effective review needs to connect identified gaps to clear policy intents and the reality of modern-day tax systems within the context of economic development and global competitiveness.

At this stage, the effectiveness of the tax law depends on administrative guidance, clarifications from the tax authority, and regulations to complement precise statutory provisions where necessary, pending future amendments.

The Committee added: ‘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.”

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