OAU Academic Calls Windfall Tax A Responsible Move For Banks In National Development

OAU Academic Calls Windfall Tax A Responsible Move For Banks In National Development

Professor Adetunji Ogunyemi, a specialist in Economic History at Obafemi Awolowo University, Ile Ife, has shared his insights on the recent amendment of the Finance Act 2020 by the National Assembly, which introduces a windfall levy on banks’ profits from foreign exchange transactions. Ogunyemi supports the policy, viewing it as a necessary measure for national development. Here are the key points from his discussion……. CONTINUE READING 

**Justification for the Windfall Levy:**
Ogunyemi argues that Nigeria’s severe financial and economic challenges justify the levy. He believes it is within the federal government’s power to enact such measures to ensure economic stability and balance. According to him, if certain entities are benefiting disproportionately without contributing adequately, it is reasonable for the government to redistribute resources to support economically disadvantaged sectors.

**Concerns About Future Uncertainty:**
Responding to fears that the windfall levy might set a precedent for future taxes, Ogunyemi likens the current situation to the economic strategies employed in the U.S. during the Great Depression. He asserts that, like past economic crises, the current economic difficulties justify temporary, targeted measures like the windfall levy to stabilize the economy and support recovery efforts.

**Countering Claims of Double Taxation:**
Ogunyemi rejects the Chartered Institute of Bankers of Nigeria’s (CIBN) claim that the levy constitutes double taxation since banks have already paid Companies Income Tax. He argues that banks have imposed questionable fees on customers, such as ATM transaction charges, which should be addressed. Therefore, he views the windfall levy as a legitimate measure, not a punitive action.

**Benefits of the Windfall Tax:**
Ogunyemi outlines several potential benefits if the levy’s revenue is invested in critical infrastructure projects rather than general budget expenditures. He suggests using the funds for significant projects like the Lagos-Calabar Coastal Road or the Port Harcourt-Maiduguri Railway, which could stimulate economic activity and development.

**Focus on State and Local Governments:**
He criticizes state governments for not acknowledging their increased revenue from the removal of petrol subsidies and improved tax collection. Ogunyemi calls for transparency and accountability from state governments regarding their financial gains and the need to invest these resources in their communities.

**Impact of Supreme Court Judgment on Local Governments:**
Ogunyemi supports the Supreme Court’s recent decision to direct allocations to local government accounts. He believes this will enhance local development, though he notes that further reforms are needed to ensure fair and independent local government elections.

Ogunyemi concludes that the windfall levy should be seen as a patriotic contribution from banks to aid national development, emphasizing its role in addressing the nation’s financial challenges.