By Dipo Olowookere

It was another trading session for the Nigerian Exchange (NGX) Limited in the green territory as it further improved by 0.13 per cent at the close of business.

The bourse managed to stay up despite profit-taking in the financial services and the energy sectors yesterday.

According to data, the insurance counter depreciated by 3.07 per cent, the banking industry went down by 0.40 per cent, and the energy space shrank by 0.11 per cent.

However, the commodity index increased by 0.65 per cent, the consumer goods landscape went up by 0.55 per cent, and the industrial goods sector closed higher by 0.11 per cent.

Consequently, the All-Share Index (ASI) soared by 214.80 points to 160,806.56 points from 160,591.76 points and the market capitalisation advanced by N137 billion to N102.822 trillion from N102.685 trillion.

Investor sentiment was weak on Thursday as Customs Street ended with 32 price gainers and 41 price losers, indicating a negative market breadth index.

Neimeth chalked up 10.00 per cent to trade at N7.70, May and Baker increased by 9.85 per cent to N26.20, eTranzact gained 9.64 per cent to finish at N13.65, Multiverse jumped by 9.51 per cent to N21.30, and Mecure Industries grew by 9.42 per cent to N74.95.

On the flip side, International Energy Insurance decreased by 9.90 per cent to N2.73, ABC Transport tumbled by 9.88 per cent to N4.47, Austin Laz crashed by 9.84 per cent to N4.58, Conoil stumbled by 9.72 per cent to N169.00, and Veritas Kapital dropped 9.69 per cent to N1.77.

The busiest stock was Chams with 60.5 million units worth N236.8 million, Linkage Assurance traded 54.1 million units valued at N97.6 million, Tantalizers transacted 45.0 million units for N129.7 million, Access Holdings sold 35.5 million units worth N815.4 million, and Champion Breweries exchanged 31.2 million units valued at N519.1 million.

When the closing gong was struck, market participants traded 645.1 million units for N16.5 billion in 44,410 deals compared with the 1.4 billion units valued at N20.7 billion transacted in 49,286 deals a day earlier, showing a fall in the trading volume, value, and number of deals by 53.92 per cent, 20.29 per cent, and 9.89 per cent apiece.

By Adedapo Adesanya

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.