๐๐๐๐โ๐ฌ ๐๐ซ๐จ๐ฉ๐จ๐ฌ๐๐ฅ๐ฌ ๐๐ก๐๐ญ ๐๐จ๐ฎ๐ฅ๐ ๐๐ง๐๐๐ซ๐ฆ๐ข๐ง๐ ๐๐๐ฒ ๐๐๐๐จ๐ซ๐ฆ ๐๐๐ฃ๐๐๐ญ๐ข๐ฏ๐๐ฌ
9. Tax on Foreign Insurance Premiums
The proposal to exempt foreign insurance companies from tax on premiums from insurance written in Nigeria to deepen penetration, while local insurance companies continue to pay tax, would be detrimental to the domestic insurance sector. This would create an unfair and harmful competitive disadvantage for local firms in their own market. The current policy is designed to protect and promote local industry and ensure a level playing field.
10. Parallel Market Forex Deduction
The new law disallows tax deduction for the difference where a business buys foreign exchange in the parallel market at a premium over the official rate. This is a critical fiscal policy choice designed to complement monetary policy, strengthen, and stabilise the Naira. By removing the tax subsidy for patronage of the parallel market, the policy aims to reduce incentives for round-tripping and redirect legitimate FX demands to the official market. This is policy congruence, not an error.
11. VAT Compliance-Linked Deductibility
The non-tax deduction for taxable transactions on which VAT has not been charged is a necessary anti-avoidance measure. It removes the advantage that some taxpayers previously enjoyed by patronising suppliers who evade VAT. This is a matter of fairness and is squarely within the control of a business to manage, especially given the provision for the self-charge of VAT. It also ensures that responsible businesses play their part in promoting voluntary tax compliance across the ecosystem.
12. Progressive Personal Income Tax
While KPMG acknowledges the reform objective of fairness and progressivity, the firm disagrees with a top marginal tax rate of 25% for the highest earners. In reality, the effective tax rate can be as low as 22% for an individual earning billions a year simply by contributing 10% to pension. This rate is competitive when compared to many other countries, including Angola 25%, Egypt 27.5%, Ghana 35%, Kenya 35%, the U.S. (Federal) 37%, South Africa 45%, and the U.K. 45%. So, the rate is not โoppressiveโ or one that will negatively affect economic growth as claimed, rather it ensures progressivity without compromising competitiveness. From a broader policy objective perspective, the increase in top marginal rate for high income earners and the reduction in corporate tax rate is designed to address the existing higher tax burden associated with business formalisation.
๐ ๐๐ฅ๐ฌ๐ ๐๐ง๐๐ฅ๐ฎ๐ฌ๐ข๐จ๐ง ๐๐ง๐ ๐ ๐๐๐ญ๐ฎ๐๐ฅ ๐๐ซ๐ซ๐จ๐ซ ๐๐ฒ ๐๐๐๐
13. Police Trust Fund
The Police Trust Fund was signed into law on May 24, 2019, with a six-year lifespan under section 2(2) of the Act, which ended in June 2025. 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.
14. Small Company Verification
The analysis concerning the tax exemptions for small companies affecting large companies’ obligations is not a new issue or an inconsistency in the new law. The small business threshold was introduced via the Finance Act 2021. This issue pre-dates the current tax laws and should not be presented as an error or omission simply by virtue of a higher tax exemption threshold under the new law.
๐๐ก๐๐ญ ๐๐๐๐ ๐๐๐๐ญ ๐๐ฎ๐ญ
While acknowledging the objectives of the reform, KPMG could have highlighted the major structural improvements under the new laws, including:
– simplification and tax harmonisation,
– the scope for reduction in corporate tax rate from 30% to 25%,
– expanded input VAT credits for businesses,
– tax exemption for low-income earners and small businesses,
– elimination of minimum tax on turnover and capital, and
– improved investment incentives for priority sectors.
A balanced assessment would have recognised these transformative elements, among others.
๐๐จ๐ง๐๐ฅ๐ฎ๐ฌ๐ข๐จ๐ง ๐๐ง๐ ๐๐๐ฒ ๐ ๐จ๐ซ๐ฐ๐๐ซ๐
The tax reform is the result of an extensive consultation with various stakeholder groups in addition to the legislative process that included widely publicised public hearings, avenues intended for all stakeholders including international firms to provide technical expertise at the formative stage.
In any comprehensive overhaul of a nationโs tax framework, clerical inconsistencies or cross-referencing gaps may occur, and these are already being identified within the government. The tax reform represents a bold step toward a self-sustaining and competitive Nigeria.
An effective review needs to connect identified gaps to clear policy intents and the reality of modern-day tax systems within the context of economic development and global competitiveness.
At this stage, the effectiveness of the tax law depends on administrative guidance, clarifications from the tax authority, and regulations to complement precise statutory provisions where necessary pending future amendments.
We urge all stakeholders to pivot from a static critique to a dynamic engagement model, which allows for clarifications and a productive partnership in the implementation of the new tax laws.