OMG! See the calibre of bank official that will be jailed over default in FX gain tax

• FG is proposing that any bank official found wanting on windtax default should be jailed
• Additionally, it is suggesting that the interest or penalty for defaulters be 10% of the withheld tax
• The President said that the N6.2 trillion that was added to the budget for 2024 will be paid for out of the revenue

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

Bank primary officials who refuse to comply with the one-time windfall tax on banks' foreign currency earnings in 2023 may face imprisonment, according to a proposal by the Federal Government.

A windfall tax is an extra levied by the government on businesses that have reaped disproportionate benefits from advantageous market conditions. Photo Credit: FG, Bloomberg / Contributor
Source: Getty Images

Additionally, it suggested interest at the current minimum re-discount rate set by the Central Bank of Nigeria, as well as a penalty equal to 10% of the levy withheld or not remitted annually.

This was highlighted on Monday in the National Assembly at a meeting on the Amendment of the Finance Bill, 2024, between the Federal Inland Revenue Service Chairman, Zack Adediji, and the Minister of Finance, Wale Edun, with the finance committees of both houses.

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President Bola Tinubu's request to modify the Finance Act to levy a one-time windfall tax on banks' foreign exchange earnings in 2023 was expeditiously passed by the Senate on Wednesday.

A windfall tax is an additional tax that the government imposes on industries or companies that have profited excessively from favorable market circumstances.

The President declared that the funds will come from revenue in order to pay for the N6.2 trillion that was added to the budget for 2024.

What the bill states

The bill which has passed the second reading states,

“The Federal Inland Revenue shall assess the realised profits, collect, account, and enforce payment of levy payable under section 30 in accordance with the powers of the Service under the Federal Inland Revenue Service (Establishment) Act 2007; “and in the exercise of its functions in 32(a) above, may enter into a deferred payment agreement with the assessed banks, provided that such deferred payment agreement is executed on or before December 31, 2024.“Any bank that fails to pay the windfall profit levy to the service and has not executed a deferred payment agreement before December 31, 2024, commits an offense and shall, upon conviction, be liable to pay the windfall profit levy withheld or not remitted in addition to a penalty of 10 per cent of the levy withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria minimum rediscount rate and imprisonment of its principal officers for a period of not more than three years.”

FG speaks on bill

Speaking about the bill during the meeting, Edun stated that even if it is minor, the "bank windfall" profit levy makes a significant contribution to the government's coffers during a period when tax collections have climbed significantly while being low.

The FIRS chairman also clarified that the windfall tax was a deduction from banks' pre-existing profits rather than a new tax levied on them.

He suggested that the government and banks split the share formula 50/50 when he spoke about it.

He said,

“These gains that are realised, the levy proposal today is 50, the bank is 50 and government is 50.“And then based on your consultation and other parts you see that we are here. And then as my boss has said, this is just a consultation. The final bill rests on what comes out of this interactive section, and then eventually the bill that we have, as you all know that we are at the executive are just to implement what you put.”

Senator Isah Jibrin (APC, Kogi East), bringing up the bill's penalty provision, requested that it be made clearer.

He said,

“My area of worry is concerning the penalty, we need to be very explicit on.“On the issue of penalty, here it is stated, 10 per cent of the tax withheld or not remitted per annum and an interest and the prevailing Central Bank of Nigeria MRR. So what are we going to do? 10 per cent is like coming from nowhere, so I would suggest that we align the MRR.”

FG plans to remove N2trn from banks

Legit.ng reported that a proposed modification to the 2023 Finance Act will tax banks 50% of their profits from the foreign exchange revaluation in 2023, according to the government of President Bola Ahmed Tinubu.

The tax might bring in at least N2 trillion for the Nigerian government if it is approved by the National Assembly.

According to Punch, the levy will be deducted from banks' 2023 foreign exchange profits in order to pay for a portion of the 2024 supplemental budget.

Source: Legit.ng