Windfall tax: FG mulls jail term for defaulting banks’ principal officers

… Edun, FIRS back tax, assure banks won’t pass levy to customers

The Nigerian government is considering a three-year jail term as a penalty for principal officers of banks that may default on the payment of the proposed 50 percent windfall tax by December 2024.

Such banks will also incur a 10 percent penalty on the amount withheld or not remitted, with interest at the prevailing Central Bank of Nigeria (CBN) Minimum Rediscount Rate (MMR).

This is contained in the proposed Finance Amendment Bill, 2024. Last week, the Senate passed for a second reading the bill seeking to amend the Finance Act, 2023. It seeks to impose and charge a one-time windfall tax on the foreign exchange gains realised by banks in the 2023 financial year to fund capital projects, education and healthcare access as well as public welfare initiatives President Bola Tinubu-led government

The government intends to boost the 2024 budget by N6.2 trillion, majorly through the proposed windfall tax. Section 32 of the amendment bill proposes that the Federal Inland Revenue Service shall assess the realised profits, collect, account and enforce payment of the levy payable.

Sub-section B allows banks to pay the windfall tax through a deferred payment agreement provided that such deferred payment agreement is executed on or before December 31, 2024.

During an interactive session on the bill organised by the joint committee of the Senate and House of Representatives committee on finance on Monday, Zach Adedeji, chairman, FIRS applauded the proposed tax, noting that the gain was a result of policies of government which also imposed hardship on ordinary Nigerians.

He noted that manufacturers alone lost a whooping N1.7 trillion to foreign exchange fluctuations, stressing that the FX gains must be redistributed in the society.

“So, it’s not about going after the profits, it’s that we are recovering the losses that we have from the other side of the economy. I want us to look at it in that perspective”, he said.

Lawmakers raised concern about the banks transferring the levy to customers, but the FIRS boss replied that there was no way it would be transferred. According to him, “This is because it is the profit you make. It is the money that people don’t care about.”

Wale Edun, the finance minister, also assured that the CBN would monitor and prevent banks from transferring the tax burden to customers, noting that the CBN has the regulatory and watchdog role, and would be on alert.

The minister described the forex windfall which banks realised virtually through no effort or value addition as an important opportunity to further shore up government revenue which he noted has improved recently.

“It is a charge based on profits that resulted from more or less being in the right place at the right time, and all over the world, it is common that society takes a share of such issues, both on land and income.

“This is also an important contribution, and it will be an important contribution to the finances of the government at this time. However, it is important to say that there already has been a robust and substantial boost to government revenue, particularly in the non-oil sector”, he said.

Sani Musa, chairman, Senate committee on finance, said the “windfall tax” was not a tax but a levy or surcharge, stressing that it does not affect Nigerians, but rather the huge profits on foreign exchange that the banks make.

He said lawmakers would still review the percentage of the levy. The proposed law stipulates 50 percent for banks and 50 percent for the government, but Sani said it was still subject to review which will be concluded and submitted Tuesday.

He, therefore, summoned Olayemi Cardoso, the CBN governor and other critical stakeholders in the banking sector to appear before the joint committee on Tuesday, July 23, to give them a fair hearing on what should constitute the law.