Business
SOME financial experts have urged the Federal Government to devise a robust implementation plan to ensure that windfall tax on banks is targeted at projects to boost the economy and improve lives.
The experts spoke during a webinar organised by Proshare with the theme: “Nigeria’s Windfall Tax: Moving Beyond Concerns to Governance.”
A windfall tax is defined as an increased tax rate applied to profits resulting from an unexpected or sudden financial gain by a specific company or industry.
The News Agency of Nigeria (NAN) reports that windfall tax was recently introduced to the banking sector to bridge part of the 2024 budget deficit.
The Federal Government introduced a 70 per cent windfall tax on banks’ extraordinary foreign exchange (FX) earnings, after banks reported significant FX revaluation gains in their 2023 audited financial statements.
Prof. Uche Uwaleke, Director, Institute of Capital Market Studies, Nasarawa State University, said that while windfall tax was a veritable revenue stream for the government, implementation required careful planning to ensure that they would not discourage investment.
He said that the success of windfall tax implementation would be dependent on the government’s commitment to transparency and accountability.
“Nigeria is currently facing hyperinflation and cost of living crisis partly on account of Naira devaluation from exchange rates unification.
“The revenues from windfall tax must be used to support businesses and the vulnerable,” he said.
Uwaleke, a member of the Presidential Committee on Fiscal Reforms and Tax Policy, urged the government to come up with clear guidelines on the implementation of the windfall tax, after consultation with key stakeholders.
He also urged the government to consider a reduction from 70 per cent to not more than 50 per cent.
Mr Teslim Shitta-Bey, Director and Chief Economist at Proshare, said that the tax should have a clear utilisation structure.
He said that Nigeria’s fiscal challenges necessitated Federal Government’s resourcefulness to resort to unorthodox means of raising revenue.
He commended government’s efforts in restoring economic stability, containing inflation, raising public sector revenues, as well as redirecting spending toward growth sectors.
He, however, said that the efforts were inadequate.
The director emphasised a whole-of-society approach to governance and a whole-of-government approach to policy execution, monitoring and control.
“If we must impose windfall tax, we should ensure that it is a coastal wave that lifts all boats.
“This is where the use of the tax becomes just as important as the amount raised,” he said.
On his part, Mr Johnson Chukwu, Group Chief Executive Officer, Cowry Asset Management Ltd., called for guidelines to bridge any trust deficit gap to ensure effective use of the windfall tax.
Chukwu said that the trust deficit could be as a result of the government’s inability to meet up with its financial commitments and promises.
He said it was pertinent to ensure that the nation’s laws were strictly enforced, with appropriate penalties in place for those violating them.
“When policies and laws are abided by, and breaches sanctioned, we may get to a point where actions of government will align with commitments made by them, and that will narrow the trust deficit,” he said.
Dr Tilewa Adebajo, Chief Executive Officer, CFG Advisory, said that consistency in government policy implementation would make windfall tax to gain wide acceptance.
He called for policy reforms aimed at reducing inflation and ensuring an enabling environment for economic stability.
A financial analyst, Mr Kalu Aja, said that there was the need for interventions aimed at cushioning economic challenges to yield long-term results.
He urged the government to ensure that the windfall tax would address social problems. (NAN)
A.I
Sept. 6, 2024
Tags: Mr Kalu Aja
