‘This is discriminatory’ — CIBN seeks meeting with Edun, CBN over windfall tax

The Chartered Institute of Bankers of Nigeria (CIBN) has urged the federal government to reconsider the imposition of a 70 percent windfall tax on banks’ foreign exchange (FX) gains.

In a statement on Wednesday, CIBN said the windfall tax could exacerbate currency volatility due to reduced market participation, with the potential to destabilise the economy.

On July 17, the national assembly said President Bola Tinubu requested the amendment of the 2023 Finance Act to impose a one-time windfall tax of 50 percent on banks’ FX gains last year.

Tinubu said the windfall tax will be used to finance infrastructure projects, education and healthcare, among others.

The national assembly passed the bill on Tuesday and increased the windfall tax to 70 percent, with retroactive application from January 1, 2023.

Sani Musa, chair of the senate finance committee, said any bank that withholds the windfall tax would be liable to pay 10 percent in addition to the levy the financial institution ought to have paid.

CIBN asked if the windfall tax would not amount to double taxation as banks already paid 30 percent income tax when they filed 2023 tax returns.

“Will this not amount to double taxation? Or 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 entity singled out for this payment,” the bankers said.

“This is discriminatory. What about other sectors or businesses that have recognised the same foreign exchange gains in their books in 2023? In countries where such 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 cautioned that imposing taxes on forex gains may deter foreign investors and negatively impact Nigeria’s investment landscape, especially at a time when banks are required to raise capital and may be looking towards foreign investors.

“The CIBN recognises the need for improving government revenue which is one of the reasons for proposing levy on forex gains of banks. As an institute, we advocate careful consideration and thorough analysis before imposing taxes on forex gains by banks,” the bankers added.

CIBN proposed stakeholders’ consultations comprising the ministry of finance, the Central Bank of Nigeria (CBN), the banks, and other relevant stakeholders to do a holistic review of the implications of the proposed windfall tax on the banks.

‘WITHHOLD ASSENT TO BILL SEEKING TO TAX BANKS’ FX GAINS’

Rasheed Bolarinwa, president, Association of Corporate & Marketing Communication Professionals of Banks (ACAMB), said banks have shown enormous support for government’s economic agenda and should not be burdened with a new levy that “obviously would be counterproductive at this time”.

Bolarinwa said with the ongoing recapitalisation — which is also aimed at supporting the government’s $1 trillion economic agenda — banks need more monetary and fiscal incentives now.

“We shouldn’t kill the goose that lays the golden eggs. Government should have a rethink. We think further consultation is needed in this case. We know the President has listening ear, as demonstrated on many occasions, and we expect banks should be given fair hearing on this,” he said.

Bolarinwa called on Tinubu to withhold assent to the bill to allow for further consultation and dialogue on the windfall tax.