The 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.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.
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.
