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ABUJA—The Nigerian Law Reform Commission, on Wednesday, called for an urgent amendment of the Capital Gains Act, CGTA, 2004, insisting that it found some defects in the law.
The Commission, through its Chairman, Prof. Jummai Audi, said it was statutorily empowered to conduct general research on all federal laws with a view to ensuring that they are in consonance with current realities.
It said the mandate included the identification of obsolete, spent and unnecessary enactments, so as to enhance the machinery of the administration of justice through the modernization of extant laws in the country.
Prof. Audi, who spoke at a national workshop the Commission organized in Abuja, described the Capital Gains Tax as “a significant source of revenue for the government in this period of trying times due to economic recession.”
He explained that Capital Gains Tax are taxed only when profits are realized by sale or exchange of assets.
“Gains on assets transferred at death are never taxed. 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,” he added.
According to him; “There have been several amendments by the government to the CGTA.
“There were however no major change or modification to the CGTA prior to the introduction of the Finance Acts 2020. The Finance Act, 2020 amended sections 2, 24 and 36 of the CGTA. One of the changes made by the Finance Act, 2020 specifies a deadline for filing Capital Gains Tax returns.
“Previously, there was no specified deadline for the filing of Capital Gains Tax returns.
“Other changes or clarifications to the Capital Gains Tax Act made by the Finance Acts, 2020 and 2021 include the location of ships and aircrafts in international traffic and when they are situated in Nigeria for the purpose of paying Capital Gains Tax, as well as other areas such as compensation for loss of office.
“The above amendments were primarily aimed at addressing ambiguities and providing clarity to certain provisions in the existing laws, as applicable to business activities in Nigeria.
“However, it is found that the Act has some defects which needs further review.
“The aim of the reform of this Act is to clarify, simplify, improve and strengthen the provisions of the Act so that taxes will be collected more effectively and fairly both in monetary and equitable terms to enhance the revenue of the nation for the needs of the citizens.”
The Law Reform Commission boss said some of the defects that were found in the CGTA, included; “the failure of the Act to indicate the manner of computing chargeable gain conflict in the light of section 43 and the Schedule to the Capital Gains Tax Act which requires capital gains tax returns to be in tandem with the provisions of section 41 of the Personal Income Tax Act and section 55 of the Companies Income Tax Act with regards to due date of filing returns”.
He listed the other defects as; “The ‘exemption’ of bodies and transactions from Capital Gains Tax is perceived to be too wide and broad, as this can lead to tax avoidance;
“The challenges associated with the task of keeping permanent record of “chargeable persons” from year to year;
“Low capital gains tax rate of 10%; non-inclusion of setting off of ‘capital loss’ against ‘‘capital gain’’ provided under section 5; as well as low monetary values in the Act such as for fines and penalties”.
Meanwhile, the Attorney General of the Federation and Minister of Justice, Mr. Abubakar Malami, SAN, who declared the workshop open, commended the Commission “for its untiring effort towards the fulfilment of its mandate through continuous delivery of law reform programmes for the overall economic and socio-political development of Nigeria.”
Malami said the national workshop was a critical step in the law reform process, saying it would held to drive the articulation and enactment of a more robust legislation that will held to address the current national economic challenges, “particularly in the area of effective economic diversification for revenue generation to service the critical areas of the economy.”