Federal Government Plans N425bn Banks Tax, National Assembly Report Due Wednesday

Federal Government Plans N425bn Banks Tax, National Assembly Report Due Wednesday

The Federal Government is preparing to levy a one-time windfall tax of over N425 billion on seven banks, targeting their foreign currency revaluation gains for the 2023 financial year. This decision follows the Senate’s approval of President Bola Tinubu’s proposal to amend the Finance Act, enabling the imposition of this tax……. CONTINUE READING 

A windfall tax is imposed by governments on sectors or businesses that have disproportionately benefited from favorable market conditions. Financial reports from the Nigerian Exchange Limited indicate that the seven banks collectively reported approximately N851 billion in foreign currency gains by the end of 2023.

The affected banks include Guaranty Trust Holding Company, United Bank for Africa, Access Holdings, FCMB Group, FBNHoldings, Zenith Bank, and Fidelity Bank Plc.

GTCO led with a significant foreign exchange revaluation gain of N441.79 billion in 2023, marking a substantial increase from previous years. Other banks such as UBA, Access Holdings, FCMB Group, FBN Holdings, Zenith Bank, and Fidelity Bank also reported substantial gains in their financial results.

The amendment seeks to impose a one-off tax of 50% on these realized foreign exchange profits. The Federal Inland Revenue Service (FIRS) will oversee the assessment and collection of these taxes, with provisions allowing banks to pay in installments subject to FIRS approval.

Critics, including KPMG’s Wale Ajayi and banking industry representatives, have expressed concerns over the retroactive application of this tax and its potential impact on banking sector stability and investor confidence.

The National Assembly’s report on this proposed tax is expected to be submitted on Wednesday, with reactions from stakeholders suggesting a need for further consultation and clarity on implementation guidelines.

This move is part of the government’s efforts to generate revenue for infrastructure development, education, healthcare, and public welfare initiatives under the Renewed Hope Agenda.