Renowned economist, Bismarck Rewane, says the 70% windfall tax imposed on banks is punitive and will deter investors.
“Don’t forget that the corporate income tax is about 30%. So, this is a very punitive tax,” he said on Channels Television’s Politics Today programme on Thursday.
“It discourages investors who say that if I lose money, I don’t get any subsidy but if I get money, I get penalised,” added Rewane, the Managing Director of Financial Derivatives Company Limited.
Rewane said “70% is too high” and advised the government to peg it at the initially proposed 50%.
Initially proposed by President Bola Tinubu at 50% on bank foreign exchange profits, the Senate increased the windfall tax to 70% and passed into law in July, to run from 2023 to 2025.
GTCO, Ecobank, Zenith, UBA, FCMB, Fidelity, Stanbic, and Access were top winnerS of FX gains in 2023 with a cumulative profit of N1.4trn.
Rewane said windfall taxes are global phenomena but they are well-utilised for social good in other places.
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“If the taxes collected in the past have been well-utilised and well-managed, then the people will pay more,” he said, adding that windfall tax is to solve revenue as well as growth and investment challenges of the economy.
The economist said windfall tax collection was vital to double the revenue of the government and achieve a $1trn economy from the less than $400bn it is at the moment.
‘Swap It For Projects
Rewane said the Federal Government should encourage companies making excess windfall taxes to swap it for projects to be a win-win situation.
He proposed a “joint venture; that is you can ask the companies who made this windfall to swap their taxes for projects. Dangote did that in Gbagada to the (Lagos) Airport and Tin Can Island. MTN did that in Enugu to Onitsha.”
He said doing so, the government gets a benefit for the projects which would have social impacts.
He suggested an appropriation of profits rather than a deduction. “The bank gets the assets, the people get the benefits of the projects and the government get the political capital,” he said.
