Capital gains tax to make market more competitive, says Oyedele

Chairman, Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, has said the new Capital Gains Tax (CGT) would make the capital market more competitive and investors’ friendly.

Oyedele spoke during a virtual public lecture organised by the Capital Market Academics of Nigeria (CMAN) yesterday.

According to him, contrary to some negative perceptions about the CGT, it was one of the lowest relative to Companies Income Tax (CIT) and Value Added Tax (VAT).

He said that many countries across different regions, developed or developing, including resource rich countries tax capital gains at normal income tax rate. According to him, based on 2024 tax collection by the Federal Inland Revenue Service (FIRS), CGT accounted for less than one per cent of CIT and VAT (2014 to 2024) with CIT amounting to N26 trillion, VAT N22 trillion and CGT N276 billion.

The chairman said that combined with the reduction of CIT from 30 per cent to 25 per cent, companies would be more profitable leading to higher valuation (expected to far exceed the incremental CGT).

Analysing the benefits of the new tax reform policy, he said that by granting input VAT credits on assets and overheads not previously applicable, the new tax reform would lower business costs and enhance cash flows.

Oyedele said the policy would ensure CGT exemption for retail investors, re-investment, pension funds, Real Estate Investment Trust (REITs), security lending, and re-organisation among others.

”The policy will ensure deduction for capital losses and other incidental costs, eliminate Withholding Tax (WHT) on bonus shares, create a level playing field for listed vs unlisted entities such as free zone tax regime.

”It will also ensure stamp duty exemption for all documents relating to the transfer of stocks and shares, harmonisation of earmarked taxes such as TET, NITDA levy, and NASENI, ” he said.

The chairman said that the tax policy would help to moderate excessive fees and levies by government agencies.

Chairman, Nigerian Exchange Group (NGX), Dr Umaru Kwairanga, said that CGT was not a new concept in the capital market.

He said that there were perceptions that the new tax act would increase the rate of CGT to a level that would have a negative impact on most investors.

According to him, perception matters a lot in financial markets and can move markets long before any real action takes place.

”We have seen that in the recent volatility in our market. It is therefore very important to manage information very well so that it does not lead to wrong or flawed perceptions that can have very real effects on markets and the economy, ” Kwairanga said.

President, Chartered Institute of Taxation of Nigeria (CITN), Innocent Ohagwu, said the CGT would not negatively impact the capital market rather, it would profit the market.

According to him, a lot of work has gone into the reform.

He urged stakeholders to support the reform policy by allowing it to operate before the criticisms.

Prof. Sheriffdeen Tella, an economist, raised concerns on the tax imposed on private bonds by the new tax policy.

Tella said the move would make investors to subscribe more to government bonds.

Former Chairman of FIRS, Muhammad Nami called for more stakeholders’ engagement to address problems facing investment decisions in the country.

According to him, analysing the policy in local languages would help citizens to understand it better with a view to making informed decisions.