Oyedele reacts to KPMG’s review of Nigeria’s tax laws

The chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has faulted the concerns raised by KPMG about Nigeria’s new tax laws, saying the bulk of the issues described by the firm as errors and loopholes are its own errors and invalid conclusions.

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In a post on X (formerly Twitter) on Saturday, Mr Oyedele claimed that KPMG does not properly understand most of the issues it pointed out in its review, and equally missed the context on broader reforms objectives.

“We acknowledge that a few points raised by KPMG are useful, particularly where they relate to implementation risks and clerical or cross-referencing issues,” he stated.

“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.”

Gaps/errors highlighted by KPMG

Earlier in its review, KPMG had noted that there are inherent errors, inconsistencies, gaps and omissions in the law, which came into force this month, adding that such shortcomings need to be urgently addressed for it to attain its objectives.

“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 said.

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

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The professional services firm observed that Section 3 (b) and (c) of the Nigerian Tax Act identifies persons on whom taxes should be imposed to include individuals, families, companies or enterprises, trustees and estate, but leaves out “community.” It added that community, however, is included in the definition of “person” under Section 201 of the same document.

KPMG suggested that if the purpose is to levy tax on community, this should be clearly introduced in Section 3 to avoid ambiguity.

Similarly, it remarked that Section 6 (2) requires that undistributed foreign profits of controlled foreign companies be “construed as distributed,” while at the same time mandating them to be “included in the profits of the Nigerian company.”

KPMG said this could trigger disparities in the treatment of dividends distributed by Nigerian companies and those shared by foreign companies. It therefore recommended that the section be modified to clarify the treatment of local and foreign dividends.

According to the firm, Section 17 (3) (c) of the tax law should be modified to exclude withholding tax on insurance premiums paid to non-residents, maintaining that imposing overseas insurance premiums may hinder economic growth and make Nigeria less competitive.

KPMG claimed that the condition that restricts foreign exchange expense deductions only to the official exchange rate published by the Central Bank of Nigeria only under Section 20 (4) should be expunged, adding that attention should rather be on enhancing liquidity and introducing stricter reporting requirements to track foreign exchange transactions.

It highlighted Section 27 of the new law, saying it is not definite on whether capital loss, apart from the one resulting from the disposal of digital of virtual assets, is deductible. The firm recommended that the section be amended to specify the deduction of capital losses.

It also suggested that since tax bands and rates have been expanded, the former consolidated personal allowance in the Personal Income Tax Act should be retained to promote voluntary compliance.

According to KPMG, hydrocarbon tax rate for deep offshore operations is omitted from the new tax law, whereas the law does not exempt such operations from hydrocarbon tax rate.

“The hydrocarbon tax rate for deep offshore should be included or deep offshore operations explicitly exempted from HCT as it is under the Petroleum Industry Act (PIA) 2021,” it stated.

Oyedele’s Intervention

Mr Oyedele disclosed that much as disagreement with policy shifts is allowed, such dissents should not be framed as errors or loopholes. He remarked that KPMG’s views would have been more effective if it had embraced a similar approach like other professional firms who engaged directly, giving room for clarifications.

According to him, most of what KPMG described as “errors,” “gaps” or “omissions” are areas where the firm prefers outcomes that differ from the choices deliberately made in the new tax laws.

He argued that the applicable tax rate on share profits is not a flat 30 per cent, contrary to the wide belief that the new tax provisions on chargeable gains would spur a sell-off in the equity market.

He also noted that the tax structure is designed from 0 per cent to a maximum of 30 per cent, which is set to reduce to 25 per cent.

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

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

He described KPMG’s point in respect of a specific VAT exemption on insurance premium as “technically unnecessary,” saying an insurance premium is not a “taxable supply” defined under the new tax law.

The concern raised by KPMG about the inclusion of “community” in the definition of a person and its omission from the charging section does not constitute a gap or an ambiguity, Mr Oyedele insisted.

“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,’” he said.

According to him, KPMG’s analysis seems to confuse the distinction between a foreign-controlled company and a foreign operation of a Nigeria company. He argued that the decision to treat dividends distributed by Nigerian companies differently from foreign companies is a deliberate policy choice, as they are fundamentally different for tax purposes.

KPMG’s recommendation that foreign companies be excluded from tax on premiums from insurance written in Nigeria in order to deepen penetration, while domestic companies continue to pay tax, would be detrimental to local insurance industry, Mr Oyedele said.

The Police Trust Fund, signed into law on 24 May 2019 with a six-year life span under Section 2 (2) of the Act, ceased operation in June 2025, he stated.

“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.”

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Mr Oyedele noted that KPMG failed to highlight key structural improvements under the new law, which include simplification and tax harmonisation, reduction in the scope of corporate tax rate from 30 to 25 per cent and expanded input VAT credits for businesses.

Others are tax exemption for low-income earners and small businesses, elimination of minimum tax on turnover and capital, and improved investment incentives for priority sectors.