The Federal Government on Monday put up a strong defence for a proposed bill seeking to amend the Finance Act 2023 and impose up to 50% windfall profit levy on all foreign exchange transactions by banks in the country.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun and the Chairman of the Federal Inland Revenue Service (FIRS), appearing before the National Assembly Joint Committee on Finance, said it is normal for government to impose such levy on windfall arising from changes in government policy and ensure that the profit is redistributed to the people.
Mr. Edun in defending the proposed amendment of the Finance Act said the government seeks to impose 50% windfall profit levy on all foreign exchange transactions by banks in 2023.
The minister was accompanied by the Chairman of FIRS, Zach Adedeji.
The Minister told Federal lawmakers 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 own ingenuity, but as a result of “changes in government policy”.
According to the Coordinating Minister for the Economy, 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 finetune the proposed legislation.
In his remarks chairman of FIRS, Zach Adedeji explained that the bank windfall profits levy would help in balancing the economic inequality in the country, especially after government introduced its harmonization policy of the foreign exchange market.
The proposed legislation has however been greeted with a few concerns by the lawmakers, the major one being that banks could transfer the burden of the levy to their customers.
But the Finance Minister allayed the fears of such possibility, asking lawmakers to give the banks the benefit of doubt, just as he allayed fears regarding possible cases of underreporting by banks.
It will be recalled that 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.
Today, the Federal Government is pushing for a 50-50 sharing formula with the banks with the penalty of jail term for would be defaulters.