Federal Government Rebuts KPMG Over Tax Reform Critique

The Federal Government has launched a firm defense of its newly enacted tax laws, sharply criticizing a recent analysis by the global professional services firm KPMG. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, dismissed much of the firm’s critique as a fundamental misunderstanding of the government’s policy intent. In a detailed rebuttal issued on Saturday, Oyedele argued that KPMG’s claims of errors and gaps in the legislation were largely based on mischaracterizations rather than actual technical flaws in the law.

The friction began when KPMG published an advisory urging the Federal Government to urgently review several provisions within the new tax framework. A major point of contention was Section 6(2) of the Nigeria Tax Act, which the firm claimed would lead to double taxation for foreign companies by treating undistributed foreign profits as distributed. KPMG warned that such a move could see these profits taxed at 30 percent, potentially harming Nigeria’s attractiveness to multinational investors.

Responding to these concerns, Oyedele clarified that the distinction between dividends from Nigerian and foreign companies was both deliberate and logical. He explained that dividends from foreign entities cannot be “franked” because they have not been subjected to Nigerian withholding tax at the source. He noted that the committee’s objective was to harmonize the system with global best practices while closing long-standing loopholes that previously allowed for base erosion and profit shifting.

The government also pushed back against KPMG’s suggestion to exempt non-resident companies from tax registration if their income is subject to final withholding tax. Oyedele maintained that tax registration and filing serve broader compliance and information purposes that go beyond mere revenue collection. He emphasized that the requirement for non-residents to register is a standard administrative tool used by tax authorities worldwide to maintain oversight of economic activities within their borders.

Regarding the impact of the new chargeable gains tax on the Nigerian stock market, Oyedele dismissed fears of a mass sell-off as being unsupported by current evidence. He pointed out that the Nigerian stock market is currently reaching all-time highs, suggesting that investors have confidence in the reforms. He further explained that the tax on gains from shares is not a flat rate and that roughly 99 percent of investors would likely qualify for unconditional exemptions or relief based on reinvestment.

One of the more technical disputes centered on the deductibility of foreign exchange losses. The government defended the decision to disallow deductions for forex sourced from the parallel market at rates higher than the official window. Oyedele framed this as a necessary fiscal measure aligned with monetary policy, aimed at discouraging “round-tripping” and supporting the stability of the Naira. He argued that allowing such deductions would effectively subsidize a market that the government is trying to regulate.

The committee also addressed the controversial link between the deductibility of expenses and Value Added Tax compliance. KPMG had questioned the fairness of this provision, but the government insisted it is a vital anti-avoidance measure. According to Oyedele, the policy is designed to eliminate the unfair competitive advantage held by businesses that patronize suppliers evading VAT. By making compliance a prerequisite for deductions, the government hopes to foster a more transparent and formal business environment.

On the subject of personal income tax, the government defended the 25 percent top marginal rate. Oyedele noted that critics often overlook the various reliefs available, such as pension contributions, which can significantly lower the effective tax rate for individuals. He compared the new Nigerian rates favorably with those of other major African and global economies, asserting that the framework was designed to be progressive and fair to low-income earners while formalizing the business sector.

The Federal Government also took the opportunity to highlight what it described as a lack of balance in the KPMG report. Oyedele noted that the firm failed to acknowledge major structural wins in the new laws, such as the planned reduction of corporate income tax to 25 percent and the removal of the minimum tax on turnover. These reforms, he argued, are aimed at simplifying the tax code and providing much-needed incentives for small businesses and low-income individuals who were previously burdened by a fragmented system.

While acknowledging that minor clerical inconsistencies can occur in any massive legislative overhaul, Oyedele stated that these are already being addressed internally. He stressed that the success of the reforms now hinges on administrative guidance and clear regulations from the tax authorities. He concluded by urging professional firms and stakeholders to move away from public critiques and instead engage in collaborative dialogue to ensure the smooth implementation of the laws for the benefit of the national economy.