…It’s KPMG’s errors, invalid conclusions – FG defends tax laws amid fresh concerns

Former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has expressed deep concerns over the new tax laws that came into effect on January 1, 2026, warning that without trust, transparency, and accountability, the reforms could undermine Nigeria’s fragile social contract..

In a detailed commentary on the implementation of the Nigeria Tax Acts passed in 2025, Moghalu argued that the core challenge facing taxation in Nigeria is not the concept itself, but the credibility of the government in managing public resources.

“The problem is not taxation per se. It’s a core aspect of the social contract. It’s the issues of absence of trust in government in a country where there is so much official corruption (‘authority stealing’): will the revenues raised from taxation be accountably spent on the welfare of citizens? Or will they be ‘privatised’ through various kinds of arrangements and ‘consultancies’?” he said.

Moghalu questioned how Nigerians could be confident that new tax revenues would be handled differently, given the country’s history of mismanaged oil wealth.

“Much of previously earned revenue from oil has been stolen, so how will this new taxation be different? Nigerians deserve to know. A social contract has yet to be established in Nigeria,” he stated.

He warned that failure to address these trust deficits could lead to serious democratic consequences, drawing a historical parallel.

“If this is not done, the tax laws might end up as ‘taxation without representation’ that led the Americans to fight their British colonialists in the 18th century to establish their country’s independence.”

Beyond trust issues, Moghalu also raised concerns about what he described as serious legitimacy problems surrounding the passage of the tax laws. He pointed to discrepancies between the initially gazetted version of the legislation and a later “certified true copy.”

“The very significant alterations in the initially gazetted version… indicate a clear intention to defraud Nigerians by those who inserted those alterations that established ‘revenue streams’ that would have gone straight into private pockets. This was a brazen and unconstitutional breach,” he said, calling for accountability.

“Will the culprits be found and held accountable?”

On the issue of timing, Moghalu acknowledged that taxation is often unpopular but noted that Nigeria’s current economic realities have worsened public perception of the policy.

“There is never a good time to tax. Also, it appears that efforts have been made to reduce the tax burdens of poor people. Poverty in Nigeria is sky high today. So, the timing created a perception problem — that of ‘taxing the poor’.”

He further argued that Nigeria’s deeper governance challenges make aggressive tax reforms premature, stressing that wealth creation should come before taxation and redistribution.

“We have fundamental problems of governance. We must first create broad-based wealth before we can either tax it or redistribute it effectively. Putting the cart before the horse is not optimal public policy,” Moghalu said.

The former CBN deputy governor also criticised the high cost of governance and the lack of transparency in managing existing revenues, including savings from fuel subsidy removal.

“The profligate cost of governance in our country indicates that we are unwilling to manage the revenues we DO have or get, judiciously. The savings from oil subsidy removal are neither apparent nor transparently accounted for, let alone deployed transformationally, and we are still borrowing heavily externally.”

He concluded by stressing that for taxation to succeed in Nigeria, key principles must work together.

“When it comes to taxation, intent, competence, and transparency/accountability must align.”

Moghalu’s intervention adds to the growing national debate over the new tax regime, as Nigerians grapple with rising living costs, governance concerns, and demands for greater accountability from public institutions.

Meanwhile, the Presidential Fiscal Policy and Tax Reforms Committee has responded to a recent publication by KPMG on Nigeria’s newly enacted tax laws.

Recall that KPMG flagged five major ‘errors’ or concerns in Nigeria’s new tax laws, which began implementation on January 1, 2026.

However, in a response released on X on Saturday by the Chairman of the Tax Committee, Taiwo Oyedele, it was said that much of KPMG’s position was based on misunderstandings of policy intent and deliberate reform choices rather than genuine errors or gaps.

The committee said it welcomed constructive feedback on the tax reforms and acknowledged that some of KPMG’s observations relating to implementation risks and clerical or cross-referencing issues were useful. However, it argued that the majority of the claims framed as “errors” or “omissions” were either invalid conclusions, misinterpretations of the law, or differences in policy preference.

According to the committee, disagreements over policy direction should not be presented as technical flaws, adding that more productive engagement would have involved direct consultations, as adopted by other professional firms.

Addressing concerns over the taxation of shares, the committee clarified that the new chargeable gains framework does not impose a flat 30 percent tax on share sales. Instead, it operates on a graduated scale from zero to a maximum of 30 percent, which will reduce to 25 percent, with about 99 percent of investors enjoying unconditional exemptions. It noted that stock market performance at record highs contradicts claims that the reforms would trigger a sell-off.

On the commencement date of the laws, the committee rejected suggestions that reforms should begin strictly at the start of an accounting year, arguing that such an approach ignores the complexity of transitioning across multiple tax bases, accounting periods, and ongoing transactions.

The committee also defended provisions taxing indirect transfers of shares, describing them as aligned with global best practices and aimed at closing loopholes long exploited by multinationals. It dismissed claims that the measure could undermine economic stability.

Responding to comments on VAT and insurance premiums, the committee explained that insurance premiums are not considered taxable supplies under Nigerian tax law, making calls for a specific exemption unnecessary.

Several of KPMG’s observations were described as reflecting misunderstandings, including concerns about the definition of “community” as a taxable person, the composition of the Joint Revenue Board, and the treatment of dividends from foreign and Nigerian companies. The committee said these were deliberate drafting and policy choices consistent with international standards.

It also rejected proposals that would exempt foreign insurance companies from tax on Nigerian-written premiums, warning that such a move would disadvantage local firms. Similarly, it defended the disallowance of tax deductions on foreign exchange purchased at parallel market rates, saying the policy supports efforts to stabilize the naira and curb round-tripping.

On personal income tax, the committee countered claims that the new top marginal rate of 25 percent was oppressive, noting that effective rates could be lower and remain competitive when compared with several African and developed economies.

The committee further accused KPMG of factual errors, including references to the Police Trust Fund, which it said had expired in 2025, and issues around small company tax exemptions that predated the new laws.

While criticizing the publication, the committee said KPMG failed to highlight major benefits of the reforms, such as tax harmonization, reduced corporate tax rates, expanded VAT credits, exemptions for low-income earners and small businesses, and improved investment incentives.

It concluded that the tax reforms followed extensive consultations and legislative scrutiny, and that any minor clerical issues were already being addressed. The committee urged stakeholders to move from “static critique” to constructive engagement to ensure effective implementation of the new tax framework.

“We welcome all perspectives that contribute to a shared understanding and successful implementation of the new tax laws. We acknowledge that a few points raised by KPMG are useful, particularly where they relate to implementation risks and clerical or cross-referencing issues. However, the majority of the publication reflected a misunderstanding of the policy intent, a mischaracterization of deliberate policy choices, and, in several instances, repetitions and presentations of opinion and preferences as facts,” the committee clarified.

“A significant proportion of the issues described as ‘errors,’ ‘gaps,’ or ‘omissions’ by KPMG are either the firm’s own errors and invalid conclusions; issues not properly understood by the firm; missed context on broader reforms objectives; areas where KPMG prefers different outcomes than the choices deliberately made in the new tax laws; or obvious clerical and editorial matters already identified internally,” the committee added.