The Attorney General of the Federation and Minister for Justice, Abubakar Malami, SAN, and the Chairman of the Nigerian Law Reform Commission, Prof. Jummai Audi, have said the Capital Gains Tax Act, Cap. C1 LFN, 2004 has some shortcomings that need to be addressed.
They disclosed this at the workshop on the Reform of Tax Laws in Nigeria, in Abuja.
Clarifying what the tax stands for, Audi said, “Capital gains tax is the type of tax levied on individuals and corporate bodies when gains arise from disposed capital assets. Assets which attract capital gains tax on disposal include: plants and machinery, land and buildings, good wills of business, shares and many others.”
She also said that some of the issues with the Act include failure to indicate the manner of computing chargeable gain conflict in the light of section 43.
She added that the exemption of bodies and transactions from capital gains tax is perceived to be too broad, as this can lead to tax avoidance.
The NLRC chairman also said some of the commission’s proposals for reform include amending section 43 (1) of the CGTA to reconcile the conflicting “due date” for filing capital gains, increasing the rate of capital gains return, increasing the rate of capital gains tax and amending section 5 of CGTA to make capital losses deductible while computing the capital gains as it is practiced in other jurisdictions.
She added that the Capital Gains Tax Law is significant as a source of revenue for the government, adding that the rate should be increased from the current 10 per cent.
The AGF, Malami, who was represented by Mrs Ifunanya Nwajagu, the Director of Legal Drafting Department, Federal Ministry of Justice, said the Finance Acts 2020 and 2021 brought the Capital Gains Tax Act in line with realities in the economy.
Malami, however, noted that there are other defects in the Act, which the Commission is reviewing to further enhance some of the provisions to make it clearer.
According to him, “some of the defects the Commission observed are the broad and wide exemption in the Act which provide opportunity for tax avoidance, the low percentage of tax chargeable on gains, lack of enforcement mechanism to ensure compliance with the Act and punishment for failure to comply.”
He further commended the NLRC for its effort towards the fulfillment of its mandate through the delivery of law reform programmes for economic and socio-political development.
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