BY CHINYERE OBIORA, LAGOS – The Bank Directors Association of Nigeria (BDAN) says described as “excessively burdensome and ill-timed” the recently imposed 70 per cent windfall tax on profits generated from foreign exchange transactions by banks in the country.
Set to apply from 2023 to 2025, the tax has raised significant concerns in the banking sector, particularly regarding its timing and potential impact on ongoing recapitalisation efforts.
In a statement by its Chairman, Mustafa Chike-Obi, BDAN acknowledged the government’s intentions behind the tax but noted that it was badly timed and further imposes hardship on the banking sector operations
Chike-Obi said the Federal Government must reconsider its stand because the high tax rate could stifle growth and innovation within the banking industry, while adversely affecting the quality of financial services available to customers and the broader economy.
He said there was need for greater consultation and dialogue between the government and stakeholders in the banking sector before making such significant changes in the system.
The statement reads; “We, the Bank Directors Association of Nigeria (LTD/GTE) wish to formally address the recent imposition of a 70 per cent levy on the profits realised from foreign exchange transactions by banks for the financial years 2023 to 2025.
“We acknowledge and respect the intentions of the government in implementing this decision; however, we feel it is essential to express our concerns regarding the magnitude of the levy, its timing and the ambiguities surrounding its implementation.
“While the imposition of this windfall tax appears to be a response to the current economic climate, we suggest that a 70 per cent tax rate is excessively burdensome and ill-timed, particularly considering the ongoing bank recapitalisation efforts.
“Such a high levy has the potential to stifle growth and innovation within the banking sector; ultimately affecting the quality of services we provide to our customers and the broader economy.
“Moreover, we believe that it is vital for all stakeholders in the banking sector to have been consulted prior to the enactment of such significant changes in the Finance Act 2023. Open dialogue and negotiation are essential to ensure that policies are both equitable and effective.”
The body further observed that the primary concern lies in the ambiguities of the language in this amendment which leave critical questions unanswered.
“Such questions as; whether the windfall tax will be implemented as a total tax charge on banks, incorporating other taxes already levied such as Company Income tax, Tertiary Education Tax, and National Information Development Levy (NITDL) among others?
“We also request clarification on what constitutes “FX transactions” to be taxed and the treatment of banks that may incur losses rather than gains during this period. We urge the government to provide clear guidelines on this matter to avoid further uncertainty,” it said
Further noting that Nigerian banks are already among the most heavily taxed globally, BDAN cited the existing AMCON’s levy imposed on total bank assets, and urged government to consider consolidating all taxes and levies on banks to alleviate the sector’s tax burden in the future
“It would also be critical to reassure the banking community that future levies and taxes will not be arbitrarily imposed”, the statement said.
