Imposing 70% tax on banks’ FX gains excessively burdensome – Bank Directors

Bank Directors Association of Nigeria, BDAN has faulted the imposition of 70 per cent tax on banks’ foreign exchange gains, describing it as excessively burdensome and ill-timed.

In a statement signed by the Chairman of BDAN, Mustafa Chike-Obi, the association called on the National Assembly to revise the amendment to the Finance Act 2023, relating to the tax and engage in constructive discussions with stakeholders in the banking sector.

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.

“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.

“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.