Don backs FG’s windfall levy on forex gains

A Professor of Economic History at the Obafemi Awolowo University, Ile Ife, Adetunji Ogunyemi, has thrown his weight behind the amendment of the Finance Act 2020 by the National Assembly to accommodate windfall levy on banks’ profits on foreign exchange transactions.

The lawyer and public finance expert submitted that the policy is in order, asking banks to see it as a contribution to national development.

The windfall levy being planned by the Federal Government has been generating serious debate in the polity, with some observers saying it will bring about more economic pressure within the financial ecosystem.

But the Federal Government has justified the introduction of the tax, saying it was informed by the need to strike a balance in the key sectors of the economy.

In an interview on Saturday, the OAU don said the country is facing a financial challenge and it is within the power of the government to initiate policies and measures that can raise more revenue to meet the country’s numerous financial needs.

He said, “Nigeria is currently in dire straits financially and generally speaking economically. It is within the power of the government of the federation going by its stated exclusive jurisdiction in the First Schedule Part I of the constitution of the Federal Republic of Nigeria to make such laws and to direct such policies and actions as to ensure peace, good order and good government in Nigeria.

“Therefore, if Nigeria is in dire straits and some Nigerians, whether persons or bodies or corporate organisations, that have been feeding fat on the system, especially when that feeding fat is not directly a function of their productive energies, then it behooves the Federal Government to ensure a balancing of duties and responsibilities within the system such that a resource-deficient sector of the economy can benefit from the resource-surplus part through what is called economic stabilisation.

“So, to me, it is perfect to amend the Finance Act 2020 to accommodate the collection of this one-off levy on the windfall that the banks in the financial system have benefited from on foreign exchange transactions in the last year.

“To me, it is perfectly in order and it is part of the duties of the government to stabilise the economy and also redistribute wealth.”

When asked whether paying the windfall levy amounts to double taxation for the commercial banks as claimed by the Chartered Bankers Institute of Nigeria, the don said, “I disagree absolutely with such stance from CIBN. What of the progressive deductions that the banks have been making concerning ATM withdrawals by both the depositors and the withdrawers? Banks charge N20 per transaction and at times N50. Many of these deductions are illegal and the CBN should have asked them to return the money to their customers. These deductions run into billions of naira.

“But it would seem that the CBN did not want to rock the boat and has allowed the banks to earn some income for their stabilisation so that when a request for re-capitalisation would come, they would have something to use for that purpose. So, the banks can’t approbate and reprobate at the same time.”