The Bank Directors Association of Nigeria (BDAN) has warned that the 70 per cent levy on profits realized from banks’ foreign exchange earnings from 2023 to 2025 is excessively burdensome and ill-timed in view of the ongoing recapitalization.
The Central Bank of Nigeria(CBN) had in March, directed commercial banks with international authorisation to increase their capital base to N500 billion and national banks to N200 billion while those with regional authorisation are expected to achieve a N50 billion capital floor.
But, BDAN in a statement released yesterday and signed by its chairman, Mr. Mustafa Chike-Obi, said such a high levy has the potential to stifle growth and innovation within the banking sector, ultimately affecting the quality of services it provides to customers and the broader economy.
‘‘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,’’ he said.
BDAN explained that while the imposition of the windfall tax appears to be a response to the current economic climate, it suggested that a 70 per cent tax rate is ill-timed, particularly considering the ongoing bank recapitalisation efforts.
“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,” he said.
BDAN noted that a primary concern lies in the ambiguities of the language in the amendment which leave critical questions unanswered.
According to the association, one of question was, 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, National Information Development Levy (NITDL), while also requesting 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.”
BDAN equally highlighted that Nigerian banks are amongst the most heavily taxed in the world due to the burden of the AMCON levy which is imposed on the total assets of banks.
It, therefore, recommend that a consolidation of all taxes and levies imposed on banks be thoroughly considered in the future.
‘‘It would also be critical to reassure the banking community that future levies and taxes will not be arbitrarily imposed.
In view of these concerns, we respectfully urge the National Assembly to revisit this amendment and engage in constructive discussions with stakeholders in the banking sector. By collaborating, we can develop a framework that effectively balances the need for revenue generation with the imperative of fostering a thriving banking environment that supports sustainable economic growth.”
The group commended the CBN for their recent efforts in stabilizing the banking sector; assuring that it remains committed to supporting and collaborating with regulators, government entities, and other stakeholders to find solutions that benefit all parties involved.
SOURCE: THESUN
