The National Assembly has passed a bill amending the Finance Act 2023, to impose a windfall tax on banks. The Act states: “There shall be levied and paid to the benefit of the Federal Government of Nigeria, a levy of 70 percent on the realized profit from all foreign exchange transactions of commercial banks within the 2023 to 2025 financial years.”
Additionally, the Act mandates that the Federal Inland Revenue Service (FIRS) will assess the realized profits, collect, account for, and enforce payment of the tax payable under Section 30, in accordance with the powers granted by the FIRS Establishment Act 2007.
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The FIRS may enter into deferred payment agreements with assessed banks, provided that such agreements are executed on or before December 31 2024. Section 2(31) of the Bill states: “Any bank that fails to pay the windfall tax to the Service and has not executed a deferred payment agreement before December 31, 2024, commits an offence and shall, upon conviction, be liable to pay the tax withheld or not remitted in addition to a penalty of 10 percent of the tax withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria Minimum Rediscount Rate, and imprisonment of its principal officers for not more than three months.”
Furthermore, the Bill specifies that the provisions of Section 30 will apply from January 1, 2023.
In its June report, the Centre for the Study of the Economies of Africa (CSEA) argued that the imposition of the 70 percent windfall tax on the banks’ foreign exchange profits could reduce their net earnings and discourage trading, potentially impacting overall sector profitability.
It said to mitigate these effects the Federal Government should ensure transparent implementation, including proposed reallocation to the manufacturing sector.
