On Tuesday, the National Assembly passed the Finance Act 2023 Amendment Bill and increased the tax on forex windfall to 70%.
Recall that last week, an executive bill was forwarded to the House of Representatives and the Senate for review and approval. The bill aims to levy a 50% tax on banks’ foreign exchange profits starting in 2023.
During his attendance at the National Assembly yesterday, Olawale Edun, the Minister of Finance and Coordinating Minister of the Economy, announced that the Federal Government has so far invested N1 trillion as an incentive into the manufacturing sector.
Following both chambers’ plenary consideration of the Joint National Assembly Committees on Finance report, the Finance Act (Amendment) Bill was passed.
Sani Musa, the chairman of the Senate Committee on Finance, and James Abiodun Faleke, his counterpart in the House, presented the report to them.
The Joint Committee in the report, observed “that the banks enjoyed windfall as a result of the exchange rate unification policy of the Federal Government.
The committee said: “The windfall was a result of FX allocation to selected commercial banks. The policy does not permit the use of windfall for dividend payments.”
Below are the committee’s recommendations:
• That the application of the provisions of Section 30 of the Principal Act shall take effect from 1st January 2023.
• The levy shall be (70% for the federal government and 30% for banks) on the realized profits from all exchange transactions of banks.
• Any bank that fails to pay the windfall profit levy to the service, has not executed the deferred payment agreement as at the time of commencement of the regime, shall be liable to pay the windfall levy withheld or not remitted in addition to a fine of 10% of the levy withheld or not remitted per annum and interest at the prevailing Central Bank of Nigeria, minimum discount rate.
According to the Coordinating Minister of the Economy and Minister of Finance, the N1 trillion lifeline for the manufacturing sector was provided within the last year.
The panel’s public hearing on Tuesday involved a continuation of the defense of Finance Act (Amendment) Bill 2024, which was the subject of Monday’s initial discussions.
The Federal Inland Revenue Service (FIRS) Chairman, Mr. Zacch Adedeji, was present at the meeting with Edun. He announced that the accelerated stabilization fund was primarily focused on many legacy projects that aimed to establish infrastructure that would increase the sector’s viability.
In response to the committee members’ request that the manufacturing sector be included in the purported levy’s beneficiary list, Edun stated that the industry had already received adequate attention.
The minister said: “There is an expenditure of one trillion naira (N1 trillion) in terms of incentives to the manufacturing sector to help them with the high cost of production.
“In addition, under the Accelerated Stabilisation and Advancement Plan, which is a six-month plan for emergency economic, fiscal, and corporate sectoral actions to help, in particular, the manufacturing sector, there is low-interest funding coming for the manufacturing sector.”
Adedeji said the proposed one-off windfall levy is geared towards the redistribution of wealth, which, according to him, would be beneficial to the various sectors.
He explained to members of the joint committee that the strategic programmes of the President Bola Ahmed Tinibu Administration were targeted at reinvigorating the manufacturing sector.
The FIRS boss said: “Accelerated stabilization funds focusing on helping the manufacturing sector are already being doled out aside from legacy projects strategically targeted at making the sector more vibrant and viable.
“Some of these strategic projects that would, in terms of infrastructure, reinvigorate the sector are the Badagry – Sokoto Highway, which would make the journey from Badagry to Sokoto in 11 hours.
“Also, the Lagos-Calabar Coastal Highway is another strategic road infrastructural project that will bring about the required connectivity for reinvigorating the manufacturing sector.
“The plan of President Bola Tinubu on the economy, manufacturing sector and development generally is very robust.”
The sharing percentage from the windfall levy between the federal government and the banks was not agreed upon before the minister, the FIRS boss and a representative of the Governor of the Central Bank of Nigeria (CBN), were excused from the meeting.
The President’s executive bill’s 50/50 sharing formula was the subject of some joint committee members’ recommendations for an upward review.
The National Assembly raised the levy from 50 per cent to 70 per cent in favour of the Federal Government.
