The Bank Directors Association of Nigeria has labeled the proposed 70 per cent windfall tax on profits derived from foreign exchange transactions by banks as both excessive and poorly timed.
According to The PUNCH, following a board meeting on Monday, the association released a statement expressing its respect for the government’s intentions behind the decision but highlighted concerns regarding the levy’s scale, timing, and the ambiguities surrounding its execution.
In the statement signed by the chairman of BDAN’s Board of Directors, Mustafa Chike-Obi, he remarked, “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.”
BDAN further emphasized its concerns about the vague language in the amendment, which leaves critical issues unresolved, such as whether the windfall tax will be considered a Total Tax charge on banks, inclusive of existing taxes like the Company Income Tax, Tertiary Education Tax, and National Information Development Levy.
The association also called for clarification on what constitutes ‘FX transactions’ subject to taxation and the approach for banks that may experience losses rather than profits during this period.
BDAN urged the government to provide clear guidelines to prevent further confusion.
Additionally, BDAN highlighted that Nigerian banks are already among the most heavily taxed globally, burdened by the Asset Management Corporation of Nigeria levy imposed on their total assets.
The association urged the National Assembly to reconsider this amendment and engage in meaningful dialogue with banking sector stakeholders.
“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,” BDAN concluded.
Earlier in the month, BDAN distanced itself from the personal opinions of certain bank chairmen who had expressed support for the proposed foreign exchange windfall tax.
