A global network of professional firms providing accounting, audit, tax and advisory services regarded as one of the “Big Four,” Klynveld Peat Marwick Goerdeler (KPMG), has faulted Nigeria’s new tax law, highlighting gaps, inconsistencies, gaps and ommissions in the document.

In a newsletter, KPMG stated that “there are certain errors, inconsistencies, gaps, omissions, and lacunae in the new tax laws that need to be urgently reconsidered to ensure the attainment of the stated objectives.”

KPMG highlighted 31 loopholes bordering on the identified shortcomings in the new tax law and suggested modifications.

Highlighting the error in
Section 3(b)&(c) of the NTA – Imposition of tax, KPMG said “The section specifies persons on whom taxes should be levied, including individuals, families, companies or enterprises, trustees, and an estate, but omits ‘community.’ However, community’ is included in the definition of ‘person’ under Section 201.”

KPMG 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.”

The organisation also faulted Section 6(2) of the NTA – Controlled foreign companies (CFC), stating that “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%).

“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.”

It recommended that the section should be modified by providing clarity on the treatment of foreign and local dividends.

KPMG concluded that the new tax laws would transform tax administration in Nigeria as many of its provisions would result in increased revenue for the government, if well implemented.

However, it stated there was always the need to strike a delicate balance between revenue generation and sustainable growth.

The organisation added, “It is, therefore, critical that government review the gaps, omissions, inconsistencies and lacunae highlighted in its 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.”

Read full newsletter here: