The duo of the federal government and National Assembly Monday clarified that the proposed Finance (Amendment) Bill 2024 is not a levy on Nigerians, but on banks from the forex gains.
They made the clarification during a public hearing organised on the Bill, by the National Assembly joint Committee on Finance.
The proposed law is of a one-time windfall tax on commercial banks’ foreign exchange revaluation gains in 2023 titled, “The Windfall Tax Conundrum: navigating the fiscal impact on Nigerian banks.”
Speaking at the public hearing, the committee chairman, Senator Sani Musa (APC Niger East), said the Bill seeks to amend the Finance Act, 2023, to provide for the imposition of windfall tax, assessment and review of profits declarations and for deferred payment agreements for financial institutions by the Federal Inland Revenue Service(FIRS).
He described the move as a pivotal step in the nation’s economic transformation journey, saying the bill seeks to impose a 50% levy on the realised profits from all foreign exchange transactions of banks within the 2023 financial year to December 2024.
Musa said: “The proposed Finance (Amendment) Bill, 2024, is a pivotal step in our nation’s economic transformation journey. This bill seeks to impose a 50% levy on the realized profits from all foreign exchange transactions of banks within the 2023 financial year to December 2024.
“The intent behind this levy is to ensure that banks contribute their fair share to national revenue, especially in light of the substantial gains made from foreign exchange activities. The levy does not affect Nigerians, it is not on Nigerians, but the huge profits on forex that the banks made.
“His Excellency President Bola Ahmed Tinubu’s administration has initiated numerous economic reforms aimed at propelling Nigeria towards a future of advancement and prosperity.”
“This bill is one of the bold decisions undertaken to provide the government with the necessary funding to address our country’s multifaceted infrastructure deficit. The success of these reforms hinges on our collective support and active participation.
“Our discussions today will cover the detailed provisions of the bill, including the Federal Inland Revenue Service’s role in assessing, collecting, and enforcing the levy, the mechanisms for deferred payment agreements, and the penalties for non-compliance. It is crucial that we address any concerns, suggestions, and insights you may have to ensure the smooth implementation of this levy.
“Your presence and input are invaluable as we work together to refine this legislation for the benefit of all Nigerians. Let us embrace this economic transition, support the government’s efforts, and collaborate to achieve a balanced and prosperous future for our nation,” the committee added.
The committee further summoned Governor Central of Nigeria (CBN) Yemi Cardoso, his team and the bankers’ committee, to appear before it Tuesday (today) for their inputs on the proposed bill.
…Edun provides further insight
In his remarks, Minister of Finance and Coordinating Minister of the Economy Wale Edun explained that the monies to be taken from the banks should not be considered as tax but levies, dismissing the view that the levies would be passed on implicitly to customers.
Edun said: “This is an important opportunity given to all stakeholders. All over the world, it is common that the society takes a share of such profit.
“This is an important contribution to the finances of the government at this time, however it is important to say that has been robust without raising taxes, there is a minimisation of taxes, government revenue has increased substantially.”
…FIRS also explains
On his part, the FIRS boss, Zacch Adedeji, further explained that surcharging the banks was imperative for wealth distribution and to balance the shortage recorded by other sectors.
…Decision putting future investments at risk
Faulting the decision, the Tax and Advisory Service firm, PricewaterhouseCoopers (PwC), said the federal government’s latest legislation to tax already reported profits of banks in 2023 could deter future investments into the country.
The firm noted that the proposed windfall tax on Nigerian banks brings a lot of challenges and implications to the banking sector and general economy investment-wise for both foreign and local investors.
It stated: “By taxing profits already realised and reported, the government risks being perceived as unpredictable, which could deter future investment and destabilise the financial markets.”
The firm further elaborated that the practical implementation of the windfall tax might present legal and perceptual challenges concerning the principles of equity, fairness, and constitutionality.
It pointed out that the proposed legislation could also deter investors by introducing uncertainty into the fiscal environment.
Also, the firm noted the difference in tax rates between the conventional 30% for company income and 50% for the proposed windfall tax on banks poses confusion to banks on the distribution of expenses from different revenue streams.
It explained that such a scenario could result in a contradiction where banks use a different principle than the one they previously applied in allocating profits to tax-exempt income.
…FG assures on N6.2trn 2024 supplementary budget
In a related development, the legislative and executive arms of the federal government have assured of prudent use of the N6.2 trillion supplementary expenditure to the 2024 budget.
Minister of Budget and National Planning Senator Atiku Bagudu gave the assurance Monday while addressing the House of Representatives’ Committee on Appropriation, chaired by Abubakar Bichi.
Bichi, had earlier in his remarks, tasked the minister to explain in details the Appropriation bill, including the N3.2 trillion capital expenditure increase and N3 trillion recurrent expenditure for the newly proposed national minimum wage, transmitted by President Bola Ahmed Tinubu, for accelerated consideration of the National Assembly.
Responding, the minister said efforts were being made to address issues bothering on security of lives across the country.
He listed the projects proposed in the Bill to include: Lagos-Calabar 1,000-kilometer road project for which the sum of N150 billion is required, and Sokoto – Badagry road projects, as well as the rail project for which the Chinese government had provided 85 percent funding while federal government was yet to provide the 15 percent counterpart funding.
Bagudu also said the Lagos-Calabar which is expected to start in three different sections, had commenced in Lagos, and the Calabar end, and one additional section Sokoto – Calabar, adding that the Lagos-Calabar express way also covered the five South East States as well as Port Harcourt – Maiduguri rail lines.
The minister further disclosed that the proposed budget was aimed at providing counterpart funding for rail projects that have literally stopped in the last year, including the longest among them – Port Harcourt Main Bridge, which will traverse Rivers, Imo, Enugu, Ebonyi, Anambra, Benue, Nasarawa, Plateau, Katsina, Bauchi, Gombe, Yobe, and other parts of the country.
The second project is Badagry-Tin Can Port, Lekki Port, while the third one is Lagos – Ibadan Standard Gauge, adding that the fourth one is Kano-Marada Standard Gauge, as well as funding for rolling stock that is required, for which the sum of N530 billion was requested is for these five rail projects.
Impressed by the minister’s submission, Bichi, in his final remarks, applauded ongoing efforts toward rejuvenating the country’s socio-economic life, and assured that necessary legislative measures will be taken for the overall benefits of Nigerians. (Additional reports from https://www.taxaccounting.com.ng)