KPMG Advisory Services has identified a series of significant weaknesses in Nigeria’s newly implemented tax framework, warning that errors and inconsistencies could undermine economic growth and frustrate the objectives of the reforms.
In a detailed review of the new regime, the firm acknowledged that the legislation could boost government revenue but cautioned that “inherent errors, inconsistencies, gaps, and omissions could stifle economic growth and hinder the very objectives the laws were designed to achieve.”
The reforms are anchored on the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), both of which came into force on January 1, 2026. However, their introduction has been clouded by uncertainty, following discrepancies between the versions of the bills passed by the National Assembly and the copies eventually gazetted. The confusion prompted lawmakers to issue “certified” versions of the Acts earlier this month.
According to Adewale Ajayi, a Partner at KPMG, while tax reform is essential to improve fairness and competitiveness, the current drafting of the laws contains gaps that demand urgent attention.
“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,” Ajayi stated in the firm’s analysis.
KPMG said its review uncovered 31 issues, ranging from minor drafting mistakes to fundamental policy contradictions. One concern centres on Section 20(4) of the NTA, which limits tax deductions for foreign expenses to the official Central Bank of Nigeria exchange rate. The firm warned that this provision fails to reflect the realities of foreign exchange scarcity and effectively penalises businesses that source currency at higher market rates.
The firm also pointed to ambiguity around the tax status of “communities”. While they are defined as taxable persons in one part of the law, they are excluded from the charging section, creating uncertainty over whether they are liable to tax or exempt.
Another area of concern is the imposition of a 30 per cent tax on capital gains from asset sales without inflation adjustments. KPMG cautioned that this could trigger widespread sell-offs in the stock market and discourage long-term investment and entrepreneurship.
For individual taxpayers, the NTAA requires annual tax filings and prescribes penalties of up to ₦100,000 for non-compliance. However, KPMG noted that the law does not specify a clear deadline for submissions, exposing taxpayers to potential penalties without adequate guidance.
The review further highlighted contradictions between the new Acts and existing 2024 regulations on Withholding Tax and VAT treatment of insurance premiums, a situation KPMG said poses a “risk of dispute” for players in the financial services sector.
KPMG also criticised the composition of the Joint Revenue Board, noting that its membership is made up entirely of government employees. The firm argued that this structure undermines the board’s independence and its ability to provide objective financial oversight.
“What is required is an independent watchdog in the mould of the Office for Budget Responsibility (OBR) in the United Kingdom,” the firm suggested, adding that such a body should be accountable to the National Assembly rather than solely to the executive.
As the 2026 tax year gets underway, KPMG is urging Nigerian companies to reassess their tax positions and prepare for compliance challenges.
“Businesses should conduct a detailed evaluation to manage undue exposures and ensure compliance,” Ajayi said. He also advised finance teams to update enterprise resource planning systems and payroll configurations to reflect the new tax rates and e-invoicing requirements.
The government has yet to respond formally to KPMG’s recommendations, although the release of the “certified” Acts indicates that the National Assembly is aware of growing pressure from stakeholders for clarity and corrective action.
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