Summary:
The Presidential Fiscal Policy and Tax Reforms Committee has firmly defended Nigeria’s newly gazetted tax framework, dismissing KPMG’s recent report of “errors” as a misinterpretation of deliberate strategic choices aimed at economic competitiveness and closing loopholes.
The debate over Nigeria’s evolving fiscal architecture has intensified, with the Federal Government pushing back against a critical assessment by KPMG Nigeria regarding the newly gazetted tax laws. Taiwo Oyedele, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, has emphatically stated that what the audit firm identified as gaps and inconsistencies are, in fact, intentional policy decisions designed to align the country with global best practices.
In a detailed rebuttal issued on Saturday, Oyedele argued that while constructive criticism is vital for successful implementation, the bulk of the concerns raised by the consulting firm stemmed from a misunderstanding of the policy intent. He noted that characterizing deliberate legislative choices as “errors” misrepresents the government’s strategy to create a self-sustaining and competitive economic environment.
Clarifying Investment and Market Concerns
Addressing fears regarding the stock market, the Committee assured investors that the new framework is investor-friendly. Oyedele clarified that the tax structure on shares ranges from 0% to a maximum of 30%, with a scheduled reduction to 25%. Crucially, he emphasized that “99% of investors are entitled to unconditional exemption,” effectively debunking fears of a market sell-off.
On the issue of the indirect transfer of shares, the Chairman described the current provision as a necessary alignment with Base Erosion and Profit Shifting (BEPS) initiatives. This move is specifically aimed at closing loopholes long exploited by multinationals to avoid tax obligations in Nigeria.
Forex and Compliance Measures
The Committee also stood firm on its decision to disallow deductions on foreign exchange transactions made at parallel market rates. Oyedele described this not as an oversight, but as a fiscal policy tool meant to complement monetary policy and discourage the use of unofficial currency markets. Furthermore, linking tax deductibility to Value Added Tax (VAT) compliance was highlighted as a deliberate anti-avoidance measure to broaden the tax net.
Addressing Ambiguities
The statement also cleared the air on several technical definitions:
- Insurance Premiums: These remain free from VAT as insurance is not classified as a taxable supply under the Nigeria Tax Act.
- Dividend Taxation: The differential treatment between foreign and local company dividends is a fundamental policy choice based on their distinct tax purposes.
- Non-Resident Obligations: Foreign entities must register for tax purposes to ensure broader compliance, even if their income is subject to a final withholding tax.
While acknowledging that minor clerical inconsistencies would be resolved through administrative regulations, Oyedele urged stakeholders to move from “static critique to dynamic engagement.” He insisted that the reforms represent a bold step forward, prioritizing fairness and revenue generation over the status quo.
