There is a certain tone governments adopt when they believe they have won an argument by force of length. Nigeria’s presidential tax committee has produced such a document in response to KPMG’s critique of the new tax laws: sprawling, lawyerly, and studiously confident. It is also curiously evasive of the question that matters most; not whether the reforms are internally coherent, but whether they are economically humane in a country where poverty, informality and inflation already conspire against the median citizen.
The committee’s rejoinder rests on a familiar technocratic defense: critics have “misunderstood policy intent”, confused preferences with errors, or failed to appreciate the grandeur of reform. That may be so. But it is also beside the point. Policy intent is not self-justifying. Nor does elegance in drafting immunize a law from inflicting pain.
Start with the government’s favorite refrain: progressivity. Nigeria’s top marginal personal income-tax rate of 25%, it argues, is modest by international standards. True – on paper. But comparisons with Britain or South Africa collapse when removed from context. Those countries offer functioning public services, predictable inflation, and broad-based social insurance. Nigeria offers little of the sort. A “competitive” tax rate in an economy where individuals self-provide electricity, water, healthcare and security is not progressive; it is cumulative extraction.
More telling is what the response does not seriously engage: the burden of indirect taxation and compliance costs. VAT enforcement tied to deductibility may improve compliance in theory. In practice, it shifts enforcement onto businesses and, ultimately, consumers; many of whom already pay more for food, transport and energy each month than they did a year ago. When inflation is high and incomes are flat, even well-designed taxes bite harder than intended.
The committee is correct that taxing indirect transfers of shares aligns with global norms, and that closing loopholes used by multinationals is sensible. But global best practice also emphasizes sequencing. Nigeria is attempting a wholesale fiscal reset in the middle of a cost-of-living crisis, currency volatility and fragile investor confidence. Timing, like taxation, is everything.
On capital markets, the government cites all-time highs as proof that share taxation has not scared investors. Markets, however, are fickle witnesses. Much of Nigeria’s equity rally reflects inflation hedging and currency adjustment, not deep faith in fiscal policy. To confuse short-term market exuberance with long-term confidence is to mistake noise for signal.
Perhaps the most revealing section is the defense of denying tax deductibility for parallel-market foreign exchange. The intention; to stabilize the naira and discourage arbitrage, is understandable. Yet it assumes a functioning official forex market that reliably meets demand. Until that condition holds, businesses will treat this provision not as discipline but as punishment, with costs passed on through higher prices or reduced investment.
The government also takes pride in consultation. Public hearings were held; stakeholders were invited. But consultation is not consensus, and volume of engagement does not equal depth of accommodation. KPMG’s critique, whether one agrees with it or not, reflects a broader anxiety among businesses: that the state is racing ahead of administrative capacity and social tolerance.
None of this is to deny the need for reform. Nigeria’s tax base is narrow, compliance weak, and public finances strained. But reform that leans heavily on formal actors in an overwhelmingly informal economy risks perverse outcomes: discouraging formalization, compressing the middle class, and deepening hardship at the margins.
It has been observed that the most dangerous moment for a government is when it believes itself intellectually unassailable. Nigeria’s tax committee would do well to remember that policy success is not measured by rebutting consultants, but by whether ordinary Nigerians feel less squeezed a year from now. On that test, the jury is very much still out.
