Economy
KPMG Identifies Inherent Errors, Inconsistencies, Others in Nigeria’s New Tax Laws
By Aduragbemi Omiyale
The Nigerian arm of global consultancy firm, KPMG, has highlighted some inherent errors, inconsistencies, gaps and omissions in the country’s new tax laws.
In a report on its website, analysed by Business Post, KPMG Nigeria charged the local authorities to address these issues to boost investor confidence.
It noted that while the new tax laws would result in increased revenue for the government, there is always the need to strike a delicate balance between revenue generation and sustainable growth.
“It is, therefore, critical that government review the gaps, omissions, inconsistencies and lacunae highlighted in this newsletter to ensure the attainment of the desired objectives. Government must also seek international cooperation and collaboration to facilitate the sharing of information, build capacity and capability of tax administration in the country,” it said.
Analysing an error in Section 3(b) and (c) of the Nigeria Tax Act (NTA), which dwells on the imposition of tax, the agency said the section specifies persons on whom taxes should be levied, including individuals, families, companies or enterprises, trustees, and an estate, but omits community, which is included in the definition of person under Section 201.
It recommended that, “If the intention is to impose tax on communities, this should be explicitly introduced in Section 3. Otherwise, the law should clearly state that communities are now exempt from tax.
It also pointed out that Section 6(2) of the NTA on Controlled Foreign Companies (CFC), the Act states that undistributed foreign profits are to be “construed as distributed” but also mandates that they be “included in the profits of the Nigerian company” (implying income tax at 30 per cent).
Though dividend distributed by a Nigerian company is deemed to be franked investment income, this does not appear to be the case with dividends distributed by foreign companies.
It thus appears that such dividends will be taxed at the income tax rate. Consequently, there will be differences in the treatment of dividends distributed by Nigerian companies and those distributed by foreign companies.
KPMG Nigeria advised the government to “modify the section by providing clarity on the treatment of foreign and local dividends.”
On Section 20(4) of the NTA focusing on deductions allowed, it states that expenses incurred in a currency other than the Naira may only be deducted to the extent of its Naira equivalent at the official exchange rate published by the Central Bank of Nigeria (CBN).
This implies that where a business buys forex at a rate that is higher than the official rate, such company cannot claim tax deduction for the difference in value between the official and the other rates.
The intention is to discourage speculative foreign exchange transactions and encourage the appreciation of the Naira. However, issues surrounding the accessibility of all forex needs due to supply problems have not been fully considered.
It recommended that, “We do not think that this condition is necessary at this time. With the current state of the economy, focus should be on improving liquidity and introducing stricter reporting requirements to track and monitor foreign exchange transactions.”
As for the next section, which dwells on deductions not allowed, it includes expenses on which VAT has not been charged. This means that such expenses will not be considered allowable tax deductions even when those expenses have been validly incurred for business purposes.
This implies that a company could be held accountable for any inaction or non-performance by its suppliers or service providers. While the defaulting service providers may eventually be required to pay the VAT during an audit or investigation, the company will have already been denied the ability to claim a deduction for the related expense.
It called for the removal of this section, saying “the only criteria should be that any expense that is wholly and exclusively incurred for business purposes should be allowable for tax purposes.”
Other sections it found errors in include Section 17(3)(c) of the NTA on taxation of non-resident persons, Section 27 of the NTA on the ascertainment of total profits of companies, Section 30 of the NTA on the ascertainment of chargeable income of an individual, Sections 39 and 40 of the NTA on computation of chargeable gains, Section 47 of the NTA on indirect transfer of ownership of companies or assets, Section 63(4) / 162(b) of the NTA on collective investment scheme, amongst others.
By Adedapo Adesanya
Four price gainers extended kept the NASD Over-the-Counter (OTC) Securities Exchange in the green territory by 0.88 per cent on Wednesday, April 22.
The advancers were led by Central Securities Clearing System (CSCS) Plc, which went up by N3.33 to close at N66.48 per share compared with the preceding day’s N63.15 per share. FrieslandCampina Wamco Plc added N1.79 to sell at N99.00 per unit versus N97.21 per unit, Afriland Properties Plc appreciated by 16 Kobo to N16.00 per share from N15.84 per share, and UBN Property Plc rose by 7 Kobo to N2.25 per unit from N2.18 per unit.
Consequently, the market capitalisation chalked up N12.99 billion to close at N2.375 trillion compared with Tuesday’s N2.354 trillion, and the NASD Unlisted Security Index (NSI) increased by 34.69 points to 3,969.96 points from 3,935.27 points.
At midweek, the value of securities traded by investors surged by 11,468.9 per cent to N21.5 million from N5.7 million, the volume of securities ballooned by 708.1 per cent to 49.5 million units from 185,420 units, and the number of deals soared by 21.7 per cent to 28 deals from 23 deals.
At the close of business, Great Nigeria Insurance (GNI) Plc was the most traded stock by value on a year-to-date basis with 3.4 billion units sold for N8.4 billion, trailed by CSCS Plc with 58.9 million units exchanged for N3.9 billion, and Okitipupa Plc with 27.8 million units traded for N1.9 billion.
GNI Plc also ended the trading session as the most traded stock by volume on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units valued at N1.2 billion.
By Adedapo Adesanya
The Naira halted its recent depreciations against the US Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Wednesday, April 22.
According to data, the domestic currency chalked up 0.17 per cent or N2.29 against the greenback at midweek to exchange for N1,348.45/$1 compared with the previous day’s rate of N1,350.74/$1 despite concerns over liquidity pressures, policy transparency, and confidence in Nigeria’s FX market, especially as the country’s foreign reserves are expected to decline further amid fluctuations in crude oil prices in the global commodity market.
However, the Naira appreciated against the Pound Sterling yesterday in the official market by N4.72 to trade at N1,821.75/£1 versus Tuesday’s price of N1,826.47/£1, and gained N7.42 against the Euro to sell at N1,582.00/€1 versus N1,589.12/€1.
The Nigerian currency maintained stability against the Dollar in the parallel market during the session at N1,375/$1, but depreciated by N9 at the GTBank forex counter to N1,363/$1 from N1,354/$1.
The Central Bank of Nigeria (CBN) announced a decline in interbank liquidity to N66.084 million across 87 deals from N91.866 million across 106 deals the previous day, a signal that FX payment requests eased on Wednesday.
Traders say weak fiscal discipline and budget overlaps are key drivers of pressure on the Naira in the black market. They raised worries, including excessive spending, delayed budgets, and the running of overlapping budget cycles.
Meanwhile, Bitcoin briefly touched $79,388 the cryptocurrency market on Wednesday before easing back to about $78,201.31.
The rally’s concentration in BTC, alongside negative funding rates that have persisted for roughly 47 days, suggests a narrow, derivatives-sceptical bid rather than broad-based enthusiasm across digital assets.
Geopolitical tensions, including a U.S. naval blockade near Iran, Iranian gunboat fire in the Strait and stalled cease-fire diplomacy, are feeding market uncertainty, with Cardano (ADA) down by 3.2 per cent to $0.2474.
Further, Solana (SOL) fell by 2.5 per cent to $85.97, Ripple (XRP) slipped by 2.3 per cent to $1.42, Ethereum (ETH) shrank by 1.7 per cent to $2,352.18, TRON (TRX) slid by 1.4 per cent to $0.3281, Dogecoin (DOGE) tumbled by 1.1 per cent to $0.0961, and Binance Coin (BNB) dropped 0.8 per cent to sell for $637.46, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
By Dipo Olowookere
Governor Babajide Sanwo-Olu of Lagos State has revealed that the annual budget of the state is now being funded largely by Internally Generated Revenue (IGR).
Speaking on Wednesday at the State House in Marina, Lagos, the Governor said revenue generated in the state from taxes specifically accounts for over 60 per cent of the appropriation act.
He also disclosed that in 2024, Lagos State earned over N1.3 trillion from IGR, allowing the government to provide basic amenities and others to residents.
Governor Sanwo-Olu attributed this achievement to the stable leadership at the Lagos State Inland Revenue Service (LIRS), charging his colleagues to emulate this.
“Governors need to give revenue agencies clear space to work. They need to give them that independence. They need to give them full tenure to do their work.
“It should not be a situation where a governor comes and wants to disrupt the tenure of the chairman. It is only when they do all of this that the confidence of taxpayers, the confidence of workers and subordinates in the system will be enhanced.
“I will be pushing my brother governors again for them to understand and appreciate that it is only when they give you what you need to work that they can get the benefits of the expertise that you all have,” Mr Sanwo-Olu said at the 159th meeting of the Joint Revenue Board (JRB) in the state.
The JRB, formerly known as the Joint Tax Board (JTB), is made up of the chairman of the Nigeria Revenue Service (NRS), chairmen of the 36 State Internal Revenue Services and the Chairman of the Federal Capital Territory (FCT), as well as representatives of key agencies including the Federal Ministry of Finance, National Identity Management Commission, Revenue Mobilisation, Allocation and Fiscal Commission, Nigeria Customs Service, Nigeria Immigration Service and the Federal Road Safety Corps.
Speaking further, the Governor said the 45 per cent increase in the IGR for 2024 was driven by reforms spearheaded by the LIRS, sustained investment in digital tax systems, expansion of the tax base, and improved engagement with taxpayers.
“We can say that our internally generated revenues now account for well over 60 per cent of our budget. It has not happened by sheer luck. It is the result of years of investment in digital tax systems, a push to expand our tax net, and building trust with our taxpayers,” he stated.
“For us, it is really about our citizens. It is about the people who have given us the trust to believe in us and to pay these taxes. My deputy and I are consistently committed to ensuring that we leave this place a lot better than we met it,” he added.
The chairman of LIRS, Mr Ayodele Subair, noted that Lagos’ hosting of the meeting again after five years reflected its economic importance.
“After a five-year interval, Lagos State is once again honoured to host this important gathering. This reflects the state’s leadership as Nigeria’s economic nerve centre,” he said.
On his part, the chairman of JRB, Mr Zacch Adedeji, represented by the Executive Secretary of JRB, Mr Olusegun Adesokan, commended Lagos for its revenue performance and governance reforms, noting that, “Prior to this, the state’s annual internal revenue was less than N94 billion. But today, Lagos generates over N1.7 trillion annually.”
“These achievements clearly demonstrate how strong revenue performance, when effectively managed, translates into tangible development outcomes for citizens,” he added.
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