The new Capital Gains Tax (CGT) will make the capital market more competitive and investor-friendly, the Presidential Fiscal Policy and Tax Reforms Committee has said.
Chairman of the committee, Prof. Taiwo Oyedele, stated this at an online public lecture organised by the Capital Market Academics of Nigeria on Wednesday.
CGT is a tax on the profit (gain) realised when an asset that has increased in value is sold or disposed of.
The tax is levied on the gain itself, not on the total amount received from the sale.
Oyedele said that, contrary to some negative perceptions about CGT, the rate was one of the lowest relative to Companies Income Tax (CIT) and Value Added Tax.
He noted that many countries, whether developed or developing, including resource-rich nations, tax capital gains at normal income tax rates.
According to him, based on 2024 tax collection by the Federal Inland Revenue Service, 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 reform would lower business costs and enhance cash flows.
Oyedele added that the policy would ensure CGT exemption for retail investors, reinvestment, pension funds, Real Estate Investment Trusts (REITs), securities lending, and reorganisation, among others.
“The policy will ensure deduction for capital losses and other incidental costs, eliminate Withholding Tax on bonus shares, create a level playing field for listed versus unlisted entities, such as a free-zone tax regime.
“It will also ensure stamp duty exemption for all documents relating to the transfer of stocks and shares and harmonisation of earmarked taxes such as TET, NITDA levy, and NASENI,” he said.
The chairman said the tax policy would help moderate excessive fees and levies charged by government agencies.
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(NAN)
