FG Dismisses KPMG Criticism of New Tax Laws

THIS DAWN — Nigeria’s new tax laws have sparked intense debate following a publication by accounting giant KPMG, which identified 31 alleged errors, gaps, and ambiguities in the legislation.

The report quickly trended online, fueling public discourse about inconsistencies, investor confidence, and the broader implications for Nigeria’s fiscal reforms.

In response, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, issued a detailed rebuttal.

He argued that KPMG’s analysis mischaracterized deliberate policy choices, projected personal preferences as facts, and overlooked the broader objectives of the reforms.

While acknowledging minor clerical errors, Oyedele insisted that the new laws are clear, intentional, and aligned with global best practices.

General Observations

KPMG’s Key Concerns

1. Communities as Taxable Persons

One of the most controversial issues raised by KPMG relates to the definition of “persons” under the law.

Section 3(b) & (c) lists taxable entities as persons, families, companies, trustees, and estates. However, another section defines “person” to include communities.

KPMG argued that this creates ambiguity: if the government intends to tax local communities such as Community Development Associations (CDAs), villages, or towns, it should state so explicitly.

Otherwise, the inclusion should be removed to avoid confusion.

Oyedele countered that statutory interpretation allows definitions to apply wherever the term appears, unless context dictates otherwise.

He explained that including “community” in the definition streamlines legislative drafting and avoids redundancy.

According to him, this is consistent with modern tax law practices worldwide.

2. Taxation of Capital Losses

Section 27 of the new law was flagged for ambiguity regarding capital losses.

Traditionally, capital losses—such as selling land at a loss—are deductible from taxable gains.

For example, if a property purchased at ₦50 million is sold for ₦10 million, the ₦40 million loss would reduce taxable liability.

KPMG noted that the new law appears to require tax payment even when losses occur, except for digital assets like cryptocurrency.

They argued that if the government intends to tax losses, which is unorthodox, it should clearly state so.

Oyedele dismissed this as a misunderstanding.

He explained that the law’s intent is to block loopholes and ensure consistency in asset taxation.

He emphasized that exemptions and deductions remain available under reinvestment provisions, and that the framework is designed to enhance fairness rather than penalize genuine losses.

3. Rent Relief Threshold

Section 30 provides rent tax relief of ₦500,000.

KPMG criticized this as inadequate given Nigeria’s rising housing costs.

They argued that while the provision aims to favor low‑income earners, it risks alienating wealthier taxpayers, potentially encouraging capital flight.

Oyedele responded that the threshold reflects deliberate progressivity.

He noted that the reform seeks to protect vulnerable households while balancing fiscal sustainability.

He argued that wealthy individuals already benefit from other deductions and incentives, and that the relief is targeted at those most in need.

4. Double Taxation of Foreign Companies

Perhaps the most contentious issue is Section 17(3)b, which KPMG says creates a risk of double taxation.

Under existing law, foreign companies without physical presence in Nigeria pay “final tax” at source when providing services to Nigerian clients.

KPMG argued that the new law requires such companies to also register locally and file annual tax returns, effectively imposing two layers of taxation.

They highlighted inconsistencies between Section 6(1), which mandates registration, and Section 11(3), which exempts filing if tax is deducted at source.

Oyedele rejected the claim of double taxation.

He clarified that the provisions distinguish between passive income and active business operations.

According to him, requiring registration ensures transparency and compliance, while final tax deductions remain applicable.

He insisted that the framework aligns with Base Erosion and Profit Shifting (BEPS) initiatives globally, designed to prevent tax avoidance by multinationals.

Broader Criticisms and Government’s Response

Ambiguity vs. Policy Choice

Oyedele emphasized that many of KPMG’s points confuse deliberate policy choices with errors.

For instance, the taxation of indirect share transfers is a global standard aimed at closing loopholes exploited by multinationals.

Similarly, disallowing deductions for foreign exchange purchased at parallel market rates is a fiscal measure to stabilize the naira and discourage round‑tripping.

He argued that while stakeholders may disagree with these choices, they should not be framed as mistakes.

“Disagreements should not be presented as errors or gaps,” he said, urging firms to engage constructively rather than sensationalize technical preferences.

Clerical Errors, Forgery Allegations Noted

Oyedele admitted that some issues raised, such as cross‑referencing inconsistencies, are clerical in nature.

He assured that these are already being identified internally and will be addressed through administrative guidance and future amendments.

Interestingly, public discourse has focused on alleged forgery—differences between the Certified True Copy (CTC) approved by the National Assembly and the gazetted version of the tax law.

KPMG’s report, however, did not address this.

Oyedele noted the omission, stressing that while discrepancies exist, they are being investigated separately.

He maintained that the substantive provisions of the law remain valid.

Implications for Investors and the Economy

KPMG warned that ambiguities could scare investors, drive capital abroad, and fuel inflation.

Oyedele countered that the opposite is true: the reforms are designed to simplify taxation, reduce corporate tax rates from 30% to 25%, expand input VAT credits, and exempt low‑income earners and small businesses.

He highlighted that Nigeria’s stock market has reached all‑time highs, with increased investment flows, demonstrating investor confidence in the reforms.

According to him, the narrative of sell‑offs or capital flight is unsubstantiated.

Oyedele criticized KPMG for failing to acknowledge the structural improvements embedded in the new laws, including:

• Simplification and harmonization of taxes.
• Expanded exemptions for small businesses.
• Elimination of minimum tax on turnover and capital.
• Improved incentives for priority sectors.
• Greater fairness through progressive personal income tax rates.

He argued that a balanced assessment should recognize these transformative elements rather than focus narrowly on perceived ambiguities.

Conclusion and Way Forward

The clash between KPMG and Taiwo Oyedele signifies the tension between technical critique and policy intent in Nigeria’s fiscal reforms.

KPMG identified 31 issues ranging from definitional ambiguities to potential double taxation.

Oyedele, on his part, insists that most are either misunderstandings or disagreements with deliberate choices.

He acknowledged minor clerical errors but defended the overall framework as clear, intentional, and globally competitive.

He urged stakeholders to pivot from static critique to dynamic engagement.

The tax man emphasized that effective implementation depends on administrative guidance, clarifications from tax authorities, and ongoing dialogue.

Ultimately, the debate reflects Nigeria’s broader struggle to balance investor confidence with domestic revenue needs.

As the reforms take root, the government’s ability to communicate intent, address ambiguities, and enforce compliance will determine whether the new tax laws achieve their goal: a fairer, simpler, and more sustainable fiscal system.