Bank Directors oppose new windfall tax, call It “excessively burdensome”

The Bank Directors Association of Nigeria (BDAN) has strongly criticized the newly introduced windfall tax by the Federal Government, describing it as “excessively burdensome and ill-timed.”

The tax, which imposes a 70 percent levy on profits from foreign exchange transactions by banks for the financial years 2023 to 2025, has raised significant concerns within the banking industry.

In a statement released by BDAN Chairman Mustapha Chike-Obi, the association warned that the high tax rate could stifle growth and innovation in the banking sector, ultimately affecting the quality of financial services available to customers and the broader economy.

The statement read: “We, the Bank Directors Association of Nigeria (LTD/GTE) wish to formally address the recent imposition of a 70 percent levy on the profits realised from foreign exchange transactions by banks for the financial years 2023 to 2025.

 “We acknowledge and respect the intentions of the government in implementing this decision; however, we feel it is essential to express our concerns regarding the magnitude of the levy, its timing, and the ambiguities surrounding its implementation.

“While the imposition of this windfall tax appears to be a response to the current economic climate, we suggest that a 70 percent tax rate is excessively burdensome and ill-timed, particularly considering the ongoing bank recapitalisation efforts.

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“Such a high levy has the potential to stifle growth and innovation within the banking sector; ultimately affecting the quality of services we provide to our customers and the broader economy.

“Moreover, we believe that it is vital for all stakeholders in the banking sector to have been consulted before the enactment of such significant changes in the Finance Act 2023. Open dialogue and negotiation are essential to ensure that policies are both equitable and effective.

“A primary concern lies in the ambiguities of the language in this amendment which leave critical questions unanswered. Such as, whether the windfall tax will be implemented as a Total Tax charge on banks, incorporating other taxes already levied such as Company Income tax, Tertiary Education Tax, National Information Development Levy (NITDL), etc.”

BDAN emphasized the need for greater consultation and dialogue between the government and banking stakeholders before implementing such significant policy changes.

The association also highlighted ambiguities in the tax’s implementation, including unclear definitions of “FX transactions” and how the tax would be applied alongside existing levies.