The Chartered Institute of Bankers of Nigeria (CIBN) has called on the federal government to reconsider the 70 percent windfall tax on banks’ foreign exchange (FX) gains.
In a statement on Wednesday, CIBN expressed concern that the windfall tax could increase currency volatility by reducing market participation, potentially destabilizing the economy.
On July 17, the national assembly announced that President Bola Tinubu had requested an amendment to the 2023 Finance Act to impose a 50 percent windfall tax on banks’ FX gains from the previous year. Tinubu stated that the windfall tax would fund infrastructure projects, education, and healthcare.
The national assembly passed the bill on Tuesday, raising the windfall tax to 70 percent with retroactive application from January 1, 2023.
Sani Musa, chair of the senate finance committee, stated that any bank withholding the windfall tax would be liable to pay an additional 10 percent on top of the levy they should have paid.
CIBN questioned whether the windfall tax would result in double taxation, as banks had already paid a 30 percent income tax on their 2023 returns.
“Will this not amount to double taxation? Or should the tax already paid be deducted from this new imposition? This proposed tax will violate fairness and equity in taxation as banks are the only entities singled out for this payment,” the statement read.
“This is discriminatory. What about other sectors or businesses that have recognized the same foreign exchange gains in their books in 2023? In countries where such a windfall tax has been imposed, there is always a corresponding incentive to cushion the effect on the affected entities, but nothing to that effect has been stated in the proposed bill.”
CIBN warned that taxing forex gains could deter foreign investors and harm Nigeria’s investment climate, especially as banks need to raise capital and may look to foreign investors.
“The CIBN acknowledges the need to improve government revenue, which is one reason for proposing the levy on forex gains of banks. As an institute, we advocate for careful consideration and thorough analysis before imposing such taxes,” CIBN added.
The institute proposed stakeholder consultations, involving the Ministry of Finance, the Central Bank of Nigeria (CBN), banks, and other relevant parties, to conduct a comprehensive review of the windfall tax implications on banks.
Rasheed Bolarinwa, president of the Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), stated that banks have shown significant support for the government’s economic agenda and should not be burdened with a new levy that would be counterproductive.
Bolarinwa highlighted the ongoing recapitalization aimed at supporting the government’s $1 trillion economic agenda and emphasized the need for more monetary and fiscal incentives for banks.
“We shouldn’t kill the goose that lays the golden eggs. The government should reconsider. Further consultation is needed in this case. We know the President has a listening ear, as demonstrated on many occasions, and we expect banks should be given a fair hearing on this,” he said.
Bolarinwa urged President Tinubu to withhold assent to the bill to allow for further consultation and dialogue on the windfall tax.
