KPMG has warned that flaws and gaps in Nigeria’s new tax laws could spark disputes, deter investment, and lead to capital flight.
The advisory firm made this known in its recent report titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” obtained by Nairametrics.
The report reviews key provisions of the Nigeria Tax Act (NTA), which took effect on 1 January 2026, and highlights areas where ambiguity or policy misalignment could undermine the law’s objectives.
What the report is saying
One major concern raised by KPMG involves Section 27 of the NTA, which addresses how companies determine total profits.
The legislation, KPMG said, does not explicitly state whether capital losses other than those from digital or virtual assets—are deductible for tax purposes.
KPMG noted that while the apparent intention of the law is to allow such losses to be deducted, the lack of clarity could result in conflicting interpretations between taxpayers and tax authorities, potentially leading to disputes.
“The NTA is not definite on whether capital loss, other than that arising from the disposal of digital or virtual assets, is deductible. However, we believe that the intention is for such losses to be deductible,” KPMG noted.
The firm advised FG to “Modify to specify the deduction of capital losses.”
Similarly, Section 30, which outlines individual chargeable income deductions, is criticized for its narrow scope.
Under the provision, deductible items are limited to contributions to the National Housing Fund (NHF), National Health Insurance Scheme (NHIS), pension contributions, KPMG noted.
It stated that annuities and life insurance premiums, interest on mortgages for owner-occupied residential houses, and rent relief of 20 per cent of annual rent, capped at N500,000.
After these deductions, the expanded tax bands and rates are applied to determine the tax payable.
According to KPMG, the narrow scope of allowable deductions and the relatively low rent relief threshold could be perceived as oppressive by taxpayers, particularly high-income earners.
The company said, “Where citizens deem the provisions of the tax law to be oppressive, it may lead to noncompliance and capital flight as wealthy individuals relocate to lower-tax jurisdictions.”
Further scrutiny falls on Sections 39 and 40, which calculate capital gains based on the difference between sales proceeds and the tax-written-down value of assets without considering inflation.
Given Nigeria’s high inflation environment, the firm warned that this approach could result in substantial tax liabilities on asset disposals, even where real economic gains are minimal.
“Consequently, any sale of assets after the effective date of the NTA will trigger a substantial exposure to income tax,” KPMG said.
To mitigate this risk, the firm recommended the introduction of a cost indexation allowance as a quick policy win.
The proposed indexation would use the Consumer Price Index from acquisition to disposal dates, with December 31, 2025, as a baseline.
This adjustment, the firm noted, would not increase capital losses but would align tax obligations more closely with economic realities.
Why this matter
The highlighted gaps and ambiguities in the NTA have significant implications for Nigeria’s economy.
Tax disputes stemming from unclear provisions could burden both taxpayers and authorities, leading to costly litigation and delayed revenues.
Additionally, perceived oppressive tax measures—especially on wealthy individuals—may trigger capital flight, where investors and high earners shift resources abroad to avoid heavy taxation.
Such outcomes threaten Nigeria’s investment climate, entrepreneurship, and job creation.
If not addressed, these tax framework weaknesses could stall economic growth and reduce government revenue needed for development.
What you should know
In December, the Federal Government said it will effectively give up about N1.4 trillion in revenue in 2026 by reducing the corporate income tax (CIT) rate from 30% to 25%.
Also, the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, earlier clarified that Nigeria’s new Capital Gains Tax (CGT) framework will not retroactively tax investment gains made before 2026.
