The Presidential Fiscal Policy and Tax Reforms Committee has addressed concerns raised by KPMG, the global advisory services firm, on Nigeria’s recently enacted tax laws, describing much of the firm’s commentary as based on misunderstandings and personal preferences rather than facts.
KPM had said there are “errors, inconsistencies, gaps, omissions, and lacunae” in the new tax laws that require urgent reconsideration to ensure the achievement of their stated objectives.
However, the committee, in a statement on Saturday, January 10, 2026, acknowledged some useful points on implementation risks but stressed that the majority of KPMG’s observations mischaracterised deliberate policy choices, repeated opinions as errors, and overlooked the broader objectives of the reforms.
The committee clarified key issues, including stock market taxes, saying share gains are not taxed at a flat 30%, adding that 99% of investors qualify for full exemptions, with the tax designed to strengthen corporate fundamentals.
On indirect share transfers, the committee said taxing indirect transfers aligns with global best practices to close loopholes and does not threaten competitiveness.
It noted that no Value Added Tax (VAT) applies to insurance premiums, saying exempting foreign insurance or allowing parallel market forex deductions would harm domestic industries and fiscal policy, adding that the new top marginal rate of 25% is competitive globally and ensures fairness without stifling growth.
The presidential committee also highlighted several factual errors in KPMG’s report, including outdated references to the Police Trust Fund and misinterpretations of small business tax thresholds.
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It further emphasised that the reform introduces major benefits, such as simplification, tax harmonisation, reduced corporate tax rates, expanded input VAT credits, and incentives for small businesses and priority sectors.
The committee, therefore, called on stakeholders to engage constructively with the implementation process, noting that administrative guidance, clarifications, and regulations will ensure the laws meet their economic development objectives.
The presidential committee response states: “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.
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,
– missed context on broader reforms objectives,
– areas where KPMG prefer different outcomes than the choices deliberately made in the new tax laws, and
– obvious clerical and editorial matters already identified internally.
While it is legitimate to disagree with policy direction, disagreements should not be framed as errors or gaps. KPMG would have been more effective if the firm adopted a similar approach like other professional firms who engaged directly providing the opportunity for clarifications 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.
- Taxation of Shares and the Stock Market
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%. 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.
The market’s 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.
- Commencement Date and Transition
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.
- 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.
- 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.
- 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.
- Joint Revenue Board (JRB) Composition
The composition and mandate of the Joint Revenue Board (JRB) are intentional. Its policy advisory role is specifically to provide a subnational tax and revenue perspective that complements the fiscal policy mandate of the Ministry of Finance. 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.
- 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 Nigeria through approved channels. The 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.
- 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.
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- Tax on Foreign Insurance Premiums
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 current policy is designed to protect and promote local industry and ensure a level playing field.
- Parallel Market Forex Deduction
The new law 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.
- 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.
- Progressive Personal Income Tax
While KPMG acknowledges the reform 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. 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.
- Police Trust Fund
The Police Trust Fund was signed into law on May 24, 2019, with a six-year lifespan under section 2(2) of the Act, which ended in 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.
- 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.
While acknowledging the objectives of the reform, 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.
A balanced assessment would have recognised these transformative elements, among others.
The tax reform is the result of an extensive consultation with various stakeholder groups in addition to the legislative process that included widely publicised public hearings, avenues intended for all stakeholders including international firms to provide technical expertise at the formative stage.
In any comprehensive overhaul of a nation’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 toward a self-sustaining and competitive Nigeria.
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.
New tax laws designed to tackle challenges, won’t hurt airlines ― FG
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.
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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