By Chinelo Obogo
The Bank Directors Association of Nigeria (BDAN) has criticised the federal government’s imposition of a 70% tax on banks’ foreign exchange profits, labeling it excessive and poorly timed.
BDAN chairman, Mustafa Chike-Obi, in a statement,
expressed concerns about the magnitude of the tax, its implementation during a period of bank recapitalisation, and the lack of clarity in the legislation. The association said that such a hefty tax could stifle growth and innovation in the banking sector, ultimately impacting service quality and the overall economy.
The association said: “We, the Bank Directors Association of Nigeria (LTDASTE) wish to formally address the recent imposition of a 70% 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 these windfall tax appears to be a response to the current economic climate, we suggest that a 70% tax rate is excessively burdensome and ill-timed in particular, 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 for our customers and the broader economy.”
Highlighting the already heavy tax burden on Nigerian banks, including the AMCON levy, BDAN called for a comprehensive review of all taxes and fees imposed on the sector. The association emphasised the need for transparency and predictability in future tax policies.
It urged the National Assembly to reconsider the amendment to the Finance Act 2023, engage in constructive dialogue with the banking industry and implement a more balanced approach that considers the banking industry’s role in economic development be followed, while addressing the government’s revenue needs.
“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.
“A primary concern lies in the ambiguities of the language in this amendment which leave critical questions unanswered. Such 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, National Information Development Levy (NITDL), etc.
“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.
“Additionally, it’s important to highlight 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. We therefore recommend that a consolidation of all taxes and fees imposed on banks be thoroughly considered in the future.
“It would also be critical to reassure the banking community that future levies and fees will not be arbitrarily imposed,” BDAN concluded.