The Bank Directors Association of Nigeria, (BDAN) has called on the National Assembly to revisit the 70% windfall tax amendment on the finance act saying it is ill-timed and burdensome in light of recent recapitalisation efforts in the banking sector.
The group stated this in a statement after its meeting where it called on the National Assembly to engage in constructive discussion while revisiting the amendments.
The group in the statement also sought further explanation on what constitutes the FX gains to be taxed and how the federal government plans to address banks which record losses rather than profits.
It stated, “is excessively burdensome and ill-timed, particularly considering the ongoing bank-recapitalization efforts,”
“We respectfully urge the National Assembly to revisit these amendments and engage in constructive discussion.”
“Such a high levy has the potential to stifle growth and innovation within the banking sector,”
“We also request clarification on what constitutes foreign-exchange transactions to be taxed and the treatment of banks that may incur losses rather than gains,”
Backstory
Last month, the federal government sent an amendment to the 2023 Finance Act which introduced a 50% windfall tax on the foreign exchange revaluation gains by Nigerian banks.
According to the Federal government, funds from the windfall tax will be used to fund infrastructure projects across the country as well as social intervention programs in the 2024 budget.
The National Assembly upon deliberation on the bill increased the windfall levy to from the proposed 50% to 70% of banks’ foreign exchange revaluation gains until 2025.
What you should know
The proposal has generated heated discussion across not just the banking sector but also tax professionals and the consulting industry.
Tax and Advisory firm, KPMG noted that the proposal could result in legal disputes stating that Nigeria’s tax laws do not support retroactive taxes while PwC says taxing already reported profit could deter future investors over policy uncertainty.
However, the Chairmen of some banks have thrown their weight behind the policy. Notably, the Chairman of FBN Holdings, Femi Otedola stated that banks should curb their excess spending on private jets, urging a focus on operational efficiency and customer service while supporting the tax.
Tony Elumelu, Chairman of UBA stated that the funds generated will be used for the benefit of the masses.
An earlier analysis by Nairametrics stated that major Nigerian banks reported around N3.3 trillion in foreign exchange revaluation gains in 2023 and the first quarter of 2024.