Concerns Mount over Retroactive Taxation of Banks’ Profit in Finance Bill

* Edun: No plan to reintroduce beverage tax

*Lawmakers slash salaries by 50% over nationwide hunger 

*Atiku: The demon is in your allowance, not salaries, commends decision

Chuks Okocha, Juliet Akoje and Adedayo Akinwale in Abuja

Some foreign investors who spoke to THISDAY yesterday  on condition of anonymity, have expressed concerns over move by the Senate to retroactively amend the Finance Act 2023, and impose a one-time windfall tax on banks’ foreign exchange gains realised in their 2023 financial statements.

This comes as the Minister of Finance, Mr. Wale Edun, described as misleading a report that the federal government was planning to reintroduce the Sugar-sweetened Beverages (SSB) tax to shore up its revenues as well as address health concerns.

Also yesterday, members of the House of Representatives resolved to slash their salaries by 50 per cent for six months as part of their sacrifice to support the ongoing hardship in the country. 

 The investors stressed that the proposed amendment to the Finance Act 2023, could hurt investors’ confidence and send a wrong signal about Nigeria’s investment climate if passed into law.

The global investors are worried that it has never happened before that a law would be backdated just to tax because the government is desirous of taxing foreign exchange earnings of banks earned in 2023.

“This is a bill to amend the 2023 Act seven months after it took effect. It introduced retroactive taxation on banks for foreign exchange traded in 2023, for whose accounts have already being audited, taxes paid and approved by shareholders. Now, they want to go back and tax the banks.

“Under Nigeria’s jurisprudence, you cannot backdate laws. Trying to backdate the law just to take monies from banks will send the wrong message about the country.

“If they want to pass a new Finance Act for 2024 or 2025, they can do so, but backdating a law just to tax banks will not be good for the country,” a source who pleaded to remain anonymous said.

She stressed that this  coming up at a time the banks are struggling to raise fresh capital, put additional burden on the financial institutions.

Part of the proposed legislation states: “The Principal Act is amended by inserting after section 29, new sections “30 – “33” and renumbering the sections appropriately. There shall be levied and paid to the benefit of the Federal Government of Nigeria a tax of 50 per cent on the realised profits from all foreign exchange transactions of banks within the 2023 financial year.

“The Federal Inland Revenue Service – shall assess the realised profits, collect, account and enforce payment of tax 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 31st December 2024. 

“Any bank that fails to pay the windfall tax to the Service and has not executed a deferred payment agreement before 31st December 2024, commits an offence and shall, upon conviction, be liable to pay the tax withheld or not remitted in addition to a penalty of 10 percent of the tax 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.”

Meanwhile, the resolution by members of the House of Representatives to slash their salaries by 50 per cent for six months, followed the adoption of an amendment to a motion by the Deputy Speaker of the House, Hon. Benjamin Kalu Okezie, on the need for lawmakers to sacrifice 50 percent of their monthly salaries to support Nigerians.

The lawmakers also appealed to the proponents of the proposed nationwide protest to maintain peace, eschew violence and open the windows for meaningful engagements with the government at all levels in order to address their issues.

However, former vice president, Atiku Abubakar, who commended the lawmakers for the decision to slash their salaries for the benefit of suffering Nigerians, said the real demon was in their allowances. 

The House made the appeal following the adoption of a motion of urgent national importance moved by Hon.  Ibrahim  Isiaka at plenary yesterday. 

Moving the motion, he said the citizens of Nigeria have the constitutional right to peaceful assembly and protest to address their grievances.

Isiaka noted that  maintaining peace and engaging in constructive dialogue with the government was crucial for the resolution of issues facing the nation.

He stressed it was undeniable that Nigeria was facing significant challenges, saying the  challenges had plagued the nation for far too long.

The lawmaker added that the issues of insecurity, unemployment, and poverty had weighed heavily on the hearts of every Nigerian.

Isiaka, however, added that the challenges were not unique to Nigeria alone, stressing that these were issues that countries across the globe grapple with on a daily basis.

He emphasised that in a world constantly changing and evolving, no nation was immune to the complexities of governance and development, saying the road to change was not an easy one.

The House, therefore, resolved that: “This honorable House appeals to the proponents of the proposed nationwide protest in Nigeria to consider a different path. A path of patience, dialogue and collaboration. Prioritise peace and open channels for meaningful engagements with the government at all levels

“Be it further resolved that all stakeholders should uphold the principles of democracy, respect human rights. And uphold the rule of law in their actions and engagements.

“We trust that through peaceful engagement and dialogue, we can collectively work towards building a better and brighter future for Nigeria.”

However, commending the lawmakers, Atiku said much as the slash by the members of the House of Representatives salaries is commendable, it was a drop in the ocean, saying the demon is in the allowances of the lawmakers and not in their salaries.

He suggested that what was desirable was in the across-board-expenses as Nigeria as a nation could not sustain  further borrowing as a way of life and fund continued irresponsibility in government.

Atiku, who took to his X account, wrote: “The sacrifice of members of the House of Representatives is commendable. 

“But it is a drop in the ocean. The demons are in the allowances and not the salaries of lawmakers and government officials in general.

“Whatever happened to the much-trumpeted implementation of the Oronsaye Report? Recently, the ballooning of MDAs with the attendant cost implications has been observed. 

“There’s too much wastage and prioritisation of non-essential expenditures. What is desirable is an across the board cut in expenses. We can no longer afford to borrow money to fund continued irresponsibility in government,” he stressed

Meanwhile the the Minister of Finance, Mr Wale Edun has clarified comment attributed to him about Federal Government’s plan to reintroduce beverage tax, describing the report as false and misleading.

Members of the National Action on Sugar Reduction Coalition (NASR) and Gatefield, a public strategy firm, had during the week paid a courtesy visit to the  Minister of Finance, where they appeared to solicit taxes to curb the consumption of sugary drinks and consequently reduce the risk of diseases like heart disease, some cancers, and type 2 diabetes.

According to the coalition, “The risk of these diseases can be increased by sugary drink consumption. 

The minister in his response, merely stated that Nigeria already has a sugary drinks tax. This  was however wrongly reported that he stated, that federal government was reintroducing beverage tax. He merely acknowledged what already existed.