The federal government may soon begin the imposition of excise tax penalties on foreign exchange transactions done outside the official market window as part of the moves to discourage multiple exchange rates in the country.
This is one of the twenty recommendations put forward by the Presidential Fiscal Policy and Tax Reform Committee, established by President Bola Tinubu in July to evaluate and provide guidance on reforms aimed at shaping Nigeria’s fiscal policy and tax system.
The Tax Committee, led by Taiwo Oyedele, proposed a set of “quick win” recommendations.
These recommendations aim to tackle urgent economic concerns, such as exchange rate management, the consequences of removing fuel subsidies, controlling inflation, and promoting economic growth.
One of these suggestions is the introduction of an excise tax on foreign exchange transactions that occur outside the official market.
Taking to his X (Twitter) account, Oyedele highlighted the key developments from their findings presented to the President.
He said that the
- “Imposition of excise tax on foreign exchange transactions outside the official market” is part of what was proposed to the federal government.”
Highlighting some other developments that may be implemented in the foreign exchange market, Oyedele stated the recommendations are meant to promote transparency, encourage ease in business transactions as well enforce the single exchange rate system in the sector. The recommendations include,
- “Permit the payment of taxes on foreign currency-denominated transactions in Naira for Nigerian businesses.
- Digitalise Nigeria’s fx regime and discourage speculative demands and hoarding of fx in cash.
- “Discontinue the fx verification portal and requirement for Certificate of Capital Importation and export proceeds restriction.”
Suspension of Multiple Taxation and Remove Impediments
As part of the recommendation from the “Quick Win” document, the federal government is also aiming to reduce the number of taxes collected at the federal, state, and local levels of government.
According to Oyedele, this move is said to ensure the removal of impediments from small and middle-scale businesses as well as bolster economic growth and development in the country.
It is important to note that there are over 60 multiple tax systems currently in operation across different tiers of government, most of which are targeted at the informal sector resulting in a constraint in the growth of SMEs.
The recommendations therefore include the following:
- “Suspension of multiple taxes which place burdens on the poor and small businesses and compensate with windfalls revenue of certain agencies.
- “Tax break for private sector in respect of wage increases to low-income earners, transport subsidy and net increase in employment.
- “Grant waiver of penalty and interests on the condition of full payment of outstanding tax liabilities on or before 31 December 2023.
- “Remove impediments to global employment opportunities for Nigerians based in Nigeria.”
Other recommendations include tax waivers for diesel, CNG, and renewables as well as a comprehensive review of tariffs on the 43 items unbanned from accessing forex in the official market and a fiscal policy review of other items prohibited for imports.
Backstory
Earlier, Nairametrics reported President Tinubu has directed the implementation of all recommendations by the Presidential Fiscal Policy and Tax Reform Committee across Ministries, Departments, and Agencies (MDAs) of the federal government.
This directive followed the submission of the committee’s report on the ‘quick win’ document by its chairman, Taiwo Oyedele, at the State House in Abuja.
The committee’s work is divided into three phases, with the subsequent two phases, the critical reforms and implementation stages, to be executed within six months and a year, respectively.
I do not see tax in black marketers as solution. It will only increase the disparity. Black markets should be outlawed while BDC and Banks alone should be officially recognises. The banks and BDC will continue taking their dollars to Black markets and make them unavailable to customers. Since customers have no better choice, they will keep on patronising the black markets
any difference between black market and BDC?
It’s obvious that this current administration has nothing to offer us than to take from us. The only this popping up here and here in Nigeria at the moment is tax and I’m not surprised because Tinubu is used to taking and taking. Let us be ready to pay tax on our lands even in the village is.
The most prescient comment in this string.Since when has placing a tax on a scarce item increased supply.It’s obvious the planners are just throwing random ideas at the proverbial blackboard with wishful thinking as a strategy!
There is a difference. BDCs are licenced by the CBN to provide Fx to retail customers
I believe the idea is to discourage people from approaching the black market and that can be possible by
1. Making it easier and faster for businesses and individuals to access fx at I&E window which means that BDCs too can access the I & E window or create a special window for small Businesses and BDCs to access which will be closely monitored and even audited periodically.
2. For Speculators that trade at the parallel market there should be strict monitoring where even beneficiaries forfeit the differential sum or are being penalized for it. This is to serve as a deterrent to others.
Where do you think the black market has been funded from for the past 30 plus years? Inbound travellers and diaspora remittances?if that’s your thinking think again.
Much the same way you cannot get a large amount of cash from your bank but you can get it from a POS operator sitting under an umbrella in close proximity to the bank gates!
Tax is not the solution tax can even make exchange rates to worsen
Are these people trying to generate more revenue or solve the fx disparity and naira free fall ? If their objective is the latter, then they should outrightly outlaw parallel market operations and send security forces to close them down and arrest both the operators and their customers when caught. However if they intend to generate more revenue by taxing them, then the government can only expect the disparity to worsen because they’d likely start factoring the new taxes into the exchange rate values, thereby burying the naira even deeper.