When Nigeria rolled out its new tax laws in 2026, the goal was clear: simplify the system and boost government revenue. But shortly after, KPMG released an explosive review highlighting several cracks that could create confusion, disputes, and unintended economic damage.
Here are the key issues KPMG flagged.
1. Vague Definitions That Invite Legal Disputes
KPMG pointed out that several terms in the law are poorly defined or inconsistently used. This includes who qualifies as a taxable “community” and how certain foreign income rules apply. Ambiguity like this often leads to court battles and uneven enforcement.
2. Capital Gains Tax Ignores Inflation Reality
Under the new law, capital gains are taxed without adjusting for inflation. In a high-inflation economy like Nigeria, this means people could be taxed on gains that are not real profits, just price increases.
3. Business Costs That Can’t Be Deducted
KPMG highlighted rules that disallow deductions for legitimate business expenses, including foreign exchange losses and some VAT-related costs. For companies already struggling with FX access, this could significantly raise their tax burden.
4. Risk of Double Taxation for Foreign Income
The treatment of foreign dividends and controlled foreign companies is unclear. According to KPMG, this opens the door to double taxation and could discourage cross-border investment.
5. Limited Relief for Individual Taxpayers
The law narrows personal tax reliefs and excludes deductions such as insurance premiums and mortgage interest. KPMG warned this could reduce compliance and hurt middle-income earners.
Why This Matters
KPMG’s concern is not opposition to reform, but implementation. Laws with gaps and inconsistencies tend to increase disputes, scare investors, and weaken trust in the tax system.
The real test of Nigeria’s tax reform will not be ambition, but clarity.
