Foreign exchange transactions conducted outside Nigeria’s official FX window will soon incur excise tax penalties.
This is one of the 20 recommendations put forward by the Presidential Fiscal Policy and Tax Reform Committee, established by President Bola Ahmed Tinubu to evaluate and provide guidance on reforms aimed at shaping Nigeria’s fiscal policy and tax system.
Announcing this development on X, formerly known as Twitter, Taiwo Oyedele, the committee’s Chairman, indicated that the committee’s “quick win” recommendations, designed to address pressing economic issues including exchange rate management, the impact of fuel subsidy removal, inflation control, and economic growth facilitation, include the imposition of excise tax on foreign exchange transactions conducted outside the official market.
This tax on FX transactions beyond the official market is expected to be implemented within 30 days as part of the initial “Quick Wins” phase.
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.
Among the other “quick win” recommendations are several measures aimed at addressing various economic challenges.
“1. Measures to address duplication of functions in public service, ensure prudent public financial management and optimize value from government assets and natural resources
2. Policy signalling and collaboration by MDAs, economic management, and policy execution team
3. Use of technology “Data4Tax” to expand the tax net
4. Increase personal income tax exempt threshold and personal relief allowance
5. Tax break for private sector in respect of wage increases to low-income earners, transport subsidy and net increase in employment
6. Permit the payment of taxes on foreign currency denominated transactions in Naira for Nigerian businesses.
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7. Remove impediments to global employment opportunities for Nigerians based in Nigeria
8. Suspension of VAT on diesel and tax waivers on CNG, CNG conversion, and renewable energy items
9. Comprehensive review of tariffs on the 43 items unbanned from accessing forex in the official market and fiscal policy review of other items prohibited for imports
10. Reforms of Withholding Tax Regulations to ensure simplicity and ease the pressure on working capital of businesses
11. Facilitate the use of mobile phones for conditional cash transfers and introduce a spending framework for subsidy removal and forex reform windfall, including a national portal to track spending by FG, states and local governments
12. Suspension of multiple taxes which place burdens on the poor and small businesses and compensate with windfalls revenue of certain agencies
13. Expand the official foreign exchange market to incorporate BDCs, forex apps and retail fx dealers, and outlaw transactions in the black market
14. Digitalise Nigeria’s fx regime and discourage speculative demands and hoarding of fx in cash.
15. Implement forward contracts for the importation of PMS as a short-term measure pending improvement in key economic indices
16. Discontinue with the fx verification portal and requirement for Certificate of Capital Importation and export proceeds restriction
17. Address impediments to export promotion and bottlenecks regarding Exports Expansion Grants, and remove restriction on repatriation and use of export proceeds by exporters
18. Modify Tax ProMax to allow taxpayers to make part payments of outstanding tax liabilities
19. Grant waiver of penalty and interests on the condition of full payment of outstanding tax liabilities on or before 31 December 2023.
