KPMG: FG Highlights How New Tax Laws Close Loopholes, Protect Local Businesses

The Federal Government has defended Nigeria’s newly enacted tax laws, asserting that they are designed to close longstanding loopholes, promote fairness, and protect domestic businesses. 

The response follows a critical analysis by KPMG, which flagged perceived gaps and potential implementation challenges in the new framework.

In a detailed statement, the Presidential Fiscal Policy and Tax Reforms Committee acknowledged that while some observations were useful, “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.”

The committee emphasized that a number of issues highlighted as “errors” or “gaps” by KPMG either stemmed from misinterpretation, missed context, or clerical matters already identified internally. 

It cautioned against framing disagreements over policy direction as flaws in the law. “While it is legitimate to disagree with policy direction, disagreements should not be framed as errors or gaps,” the statement said.

Key reforms defended by the government include the taxation of indirect share transfers, measures on foreign insurance premiums, and disallowing tax deductions for foreign exchange transactions in the parallel market.

According to the committee, these measures are aligned with global best practices and anti-base erosion policies, while protecting local firms from unfair competition. “The current policy is designed to protect and promote local industry and ensure a level playing field,” the statement said.

The committee also clarified misconceptions around personal income and corporate taxation. While the top marginal rate for individuals is 25%, effective rates can be as low as 22% for high-income earners making pension contributions, a structure it described as “competitive” internationally, citing comparisons with countries such as Egypt (27.5%) and Kenya (35%).

Other reforms include expanded VAT input credits, tax exemptions for low-income earners and small businesses, elimination of minimum tax on turnover and capital, and investment incentives for priority sectors. 

The committee said these transformative elements were overlooked in KPMG’s analysis.

“The tax reform represents a bold step toward a self-sustaining and competitive Nigeria,” the statement concluded, urging stakeholders to engage dynamically with the implementation process and leverage clarifications and administrative guidance for compliance.