The Minister of Finance and Coordinating Minister for the Economy, Olawale Edun, on Monday, July 22, defended the federal government’s proposed one-off tax on 2023 foreign exchange (forex) gain by banks in the country.
The federal government’s plan to tax the banks’ gain in the country is contained in the proposed amendment to the 2023 Finance Act before the National Assembly.
Also before the National Assembly is an Executive Bill seeking an amendment to the 2024 Appropriation Act to raise N6.2 trillion to fund infrastructure.
Appearing before the National Assembly Joint Committee on Finance, Edun and the Chairman of the Federal Inland Revenue, Zach Adedeji, said it is normal for the government to impose such levy on windfall arising from changes in government policy and ensure that the profit is redistributed to the people.
The Minister told the panel that it is common to impose such levies on windfall all over the world, and in this case, the banks in Nigeria who he said profited so much from foreign exchange transactions, not by their ingenuity but as a result of changes in government policy.
According to Edun, the “bank windfall” profit levy although small still constitutes an important contribution to government finances at a time when revenues have substantially increased despite minimizing taxes.
He however expressed displeasure at the absence of the Central Bank and the Banker’s Committee at the crucial meeting to fine-tune the proposed legislation.
The FIRS boss, Adedeji, explained that the Bank Windfall profits levy would help in balancing the economic inequality in the country especially after the government introduced its harmonization policy of the foreign exchange market.
The proposed legislation has however been greeted with a few concerns, a major one being that banks could transfer the burden of the levy to their customers.
The Finance Minister in his response however asked lawmakers to give the banks the benefit of the doubt.
He also allayed fears regarding possible cases of underreporting by banks.
The Central Bank of Nigeria had in a circular in March directed commercial banks in the country not to touch or spend the profits they made from foreign exchange transactions
At the moment, the Federal Government is pushing for a 50-50 sharing formula with the banks with defaulters liable to go to jail upon the proposed bill becomes law.
