…By Larry John for TDPel Media.
During a workshop on the Reform of Tax Laws held in Abuja, the Attorney General of the Federation and Minister for Justice, Abubakar Malami, and Prof. Jummai Audi, the Chairman of the Nigerian Law Reform Commission, recognized the existence of deficiencies in the Capital Gains Tax Act that require rectification.
Prof. Jummai Audi provided a definition of capital gains tax, describing it as a levy imposed on individuals and businesses when they make a profit from the sale of capital assets, such as machinery, land, buildings, business goodwill, and shares.
She further explained that the Act suffers from several issues, including the lack of clear guidelines on how to calculate chargeable gain and an overly broad exemption of entities and transactions from the tax, which could potentially promote tax avoidance.
During the workshop, Prof. Jummai Audi outlined some proposed changes by the Nigerian Law Reform Commission to address the shortcomings of the Act.
These proposed changes include amending certain sections to resolve conflicting due dates for filing capital gains, increasing the capital gains return rate, and allowing for the deduction of capital losses when computing capital gains.
Additionally, she suggested that the current 10% tax rate should be raised, considering the significance of this law as a government revenue source.
Representing Abubakar Malami, Mrs. Ifunanya Nwajagu, Director of the Legal Drafting Department at the Federal Ministry of Justice, acknowledged that the Finance Acts of 2020 and 2021 had already brought the Capital Gains Tax Act in line with the prevailing economic situation.
However, she admitted that there were still additional flaws in the Act being examined by the Commission for further improvements.
Expressing his concern, Abubakar Malami emphasized the need to address the flaws in the Act, which included the overly broad exemptions that facilitated tax avoidance, the low tax percentage applied to gains, the absence of an enforcement mechanism to ensure compliance with the Act, and the lack of penalties for non-compliance.
In conclusion, Abubakar Malami commended the Nigerian Law Reform Commission for their efforts in promoting legal reform, recognizing its significance for Nigeria’s economic and socio-political development.