As the premier Institute advocating for sound corporate governance in Nigeria, Chartered Institute of Directors Nigeria (CIoD) has expressed worry over the recent Federal Government policy, imposing a 70% windfall tax on profits generated from foreign exchange transactions by banks from 2023 to 2025 [Read Here].
CIoD however noted that these drawbacks could have adverse effect on the economy.
In a statement on Thursday, signed by Bamidele Alimi, director general/CEO, Chartered Institute of Directors Nigeria (CIoD), he reeled out the Institute’s recommendation towards enabling a ‘balanced economic policy’, saying that the government should;
- Reduce the Tax Rate Gradually – Lower the windfall tax rate gradually over the years to give banks time to adjust.
- Introduce Thresholds for Tax Applicability – Implement a threshold below which the windfall tax would not apply, protecting smaller banks and fostering competition.
- Offer Incentives for Investment in Innovation – Provide tax credits or exemptions for banks that invest in innovation, technology, and financial inclusion initiatives.
- Conduct a Comprehensive Impact Assessment – Conduct a thorough impact assessment before finalising the tax policy implementation to understand its potential effects on the banking sector and the broader economy.
- Encourage Stakeholder Consultation – Engage in extensive consultations with key stakeholders, including banks, industry associations, and economic experts, to design a more balanced tax policy.
- Promote Alternative Revenue Sources – Explore alternative revenue sources to reduce reliance on windfall taxes, such as improving tax collection efficiency in other sectors.
- Implement Varied Percentages for Sustainable Banking Practices – Vary percentage for banks that engage in sustainable and socially responsible banking practices.
- Monitor and Review the Policy Regularly – Establish a mechanism for regular review and adjustment of the windfall tax policy to ensure it remains fair and effective over time.
“While the intention behind the Bank Windfall Tax policy may be to generate additional revenue for the government, the potential negative implications for the banking sector and the broader economy are significant. We urge the government to reconsider the policy, to find a balance that ensures both revenue generation and the continued growth and stability of the banking sector.
“The policy recommendation will ensure a more moderate approach to the windfall tax and could help mitigate the risks outlined while still achieving the policy’s objectives”, the statement by CIoD reads.
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