Senate passes bill increasing windfall tax on banks to 70%, CIBN kicks

Senate passes bill increasing windfall tax on banks to 70%, cibn kicksThe Senate has passed a Bill seeking to amend the Finance Act, of 2023 to impose and charge a windfall levy on banks’ foreign exchange gains, but with an amendment from 50% to 70%  as the levy charge.
However, the Chartered Institute of Bankers of Nigeria (CIBN), has warned on the negative implications of the proposed tax plans.
BusinessDay reports that the Bill was read for a third time after the Upper chamber considered the report of the Committee on Finance during plenary on Tuesday.
The additional N6.2 trillion contained in the Appropriation Amendment Bill will be financed by the one-time windfall tax on banks’ foreign exchange profits as approved by the National Assembly, and other independent sources of revenue.

The Senate approved further amendments to the Finance Amendment Bill presented by President Tinubu.

The Bill initially proposed a 50% sharing formula on the realized profits on the exchange transactions of the banks, but the Senate amended it to reflect an upward review to 70%, stressing that the windfall was not a result of any effort of the banks or value addition, but as a result of government policy which must be redistributed.

The Senate also amended the Bill approving the payment of the levy to take effect from the new foreign exchange regime to 2025, and not from January 2024. Lawmakers noted that the initial proposal would mean creating a retrospective law.

The Upper Chamber also removed the proposed jail term of up to three years for  Principal officers of defaulting banks. The Bill now prescribes that any bank that fails to pay the windfall levy to the federal Inland RRevenueService and has not executed the deferred payment agreement shall be liable to pay a windfall levy not remitted in addition to a fine of 10% of the levy withheld or not remitted er annum and interest at the prevailing Central Bank of Nigeria (CBN) Minimum Rediscount Rate (MMR)

 

CIBN kicks…

Meanwhile, The Guardian reports that plans by the Federal Government to impose taxes on foreign exchange (FX) gains on banks may deter foreign investors and negatively impact Nigeria’s investment landscape, the Chartered Institute of Bankers of Nigeria (CIBN), has warned.

The institute argued that the action could discourage foreign investors, especially at a time when banks are required to raise capital where they may be looking towards attracting foreign investors.

President/Chairman of Council, CIBN, Prof. Pius Olanrewaju, in a letter to the Chairman, Senate Committee on Finance, Mohammed Musa, on ‘Imposition of Income Tax on Foreign Exchange Gains of Banks’, saying the tax could lead to reduced investment, decreased liquidity and increased costs as well as negatively impact economic growth.

According to him, the tax could lead to reduced market participation, exacerbating currency fluctuations and potentially destabilise the economy.

Noting that the CIBN recognises the need for improving government revenue which, he said, was one of the reasons for proposing tax levy on foreign exchange gains of banks, Olanrewaju advocated for careful consideration and thorough analysis before imposing taxes on foreign exchange gains by banks.

He said the institute proposed stakeholders’ meeting comprising the Ministry of Finance, the Central Bank of Nigeria, the banks and other relevant stakeholders where all the parties would do a holistic review of the implications of the proposed tax on the industry.

The CIBN chief stressed that the proposed tax might not be the best way to address the foreign exchange position of banks at this time.

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