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Sunak to cut tax on banks to keep City competitive, say reports

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Sunak to cut tax on banks to keep City competitive, say reports

Rishi Sunak is preparing to announce a tax cut for Britain’s biggest banks at next week’s budget to maintain the competitiveness of the City of London after Brexit, according to reports, despite plans to raise taxes on workers.

Ahead of the setpiece budget and spending review next week, the Financial Times said the chancellor planned to slash the corporation tax surcharge imposed on the banking industry by more than 60%, taking the levy from its current level of 8% to just 3% from April 2023.

The development comes after Sunak had warned the Conservative party conference this month that the time for tax cuts would need to wait until the public finances were back on a sustainable footing, amid record levels of government borrowing incurred during the Covid-19 pandemic.

Since the start of 2021, the chancellor has announced plans to raise taxes by £36bn a year – a bigger rise than at any budget since the mid-1970s – including plans to raise national insurance taxes on workers and businesses.

It also comes after the government slashed universal credit benefits from early October by more than £1,000 a year in the biggest overnight cut for social security benefits, in a development poverty campaigners warn would push more households into distress amid an unfolding cost of living crisis this autumn.

The chancellor announced a review of the banking industry surcharge at the spring budget, saying a planned increase in the main rate of corporation tax could put London at a disadvantage to other big financial centres such as New York and Hong Kong.

Corporation tax is set to rise from 19% to 25% from April 2023, which the Treasury said at the March budget “would make UK taxation of banks uncompetitive and damage one of the UK’s key exports”.

It comes amid concerns over the impact of Brexit on the City of London as large amounts of financial business continue to steadily drift to European financial centres, as well as to Asia and the US. Earlier this year, it emerged Amsterdam had overtaken London as Europe’s top share trading hub, raising questions over the future of the City and its contribution to the wider UK economy and the British exchequer.

The chancellor’s critics leapt on Sunak’s comments to the Tory party conference earlier this month, amid anticipation for a tough tax and spending settlement elsewhere at next week’s budget.

John McDonnell, the former shadow chancellor, said: “Sunak talked about morality in his conference speech, where’s the morality in cutting universal credit forcing more children into poverty whilst reducing the taxes on wealthy banks? Appalling judgment.”

Despite improvements over the past year as the economy recovers from Covid, the government is still on track to borrow £180bn in the current financial year, or about 7.7% of national income. Since the second world war, such a level has only been reached during the financial crisis and last year.

The banking surcharge was introduced by George Osborne in 2015 with the aim of ensuring a fair contribution from the banking industry after the then chancellor scaled back a separate levy on lenders’ balance sheets, and cut corporation tax for other firms to among the lowest levels in the western world. The levy raised £1.5bn in 2019.

Against the backdrop of heavy lobbying from the sector, Sunak dropped a heavy hint in his Mansion House speech in July that a fresh settlement was likely, saying that his ongoing conversations with banks had “only reinforced my view that the combined tax rate on UK banking profits should not increase significantly from its current level”.

A Treasury spokesperson said: “We do not comment on fiscal policy outside of budget.”

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Business

DMO Issues Two FGN Savings Bonds At N1,000/unit

The Debt Management Office (DMO) has announced its Dec. issuance of two Federal Government of Nigeria (FGN) Savings Bonds at N1,000 per unit.

According to a statement by the DMO, the first offer is a two-year FGN Savings Bond due on Dec. 14, 2022, at an interest rate of 12.255 percent per annum.

The second one is a three-year FGN Savings Bond due on Dec. 14, 2025, at a 13.255 percent interest rate per annum.

It said that the opening date for the issuance of the bonds is Dec.5, the closing date is Dec. 9, the settlement date, is Dec. 14 while coupon payment dates are March 14, June 14, Sept. 14, and Dec. 14.

“They are issued at N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.

“Interest is payable quarterly, while bullet repayment is made on the maturity date, ” it said.

It added that FGN savings bonds qualify as securities in which trustees can invest under the Trustee Investment Act.

“They qualify as government securities within the meaning of the Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds amongst other Investors.

“They are listed on the Nigerian Stock Exchange and qualify as liquid assets for liquidity ratio calculation for banks,” it said.

The statement said they were backed by the full faith and credit of the Federal Government of Nigeria, and charged upon the general assets of the country.

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DMO Says It has Raised N130bn From Sukuk For Key Road Projects

The Debt Management Office (DMO) says it raised N130 billion from its N100 billion sovereign al ’Ijarah sukuk opened on November 21, 2022.

DMO, in a statement on Monday disclosed that the offer of N100 billion was “upsized to N130 billion due to the over 165 percent subscription level”.

The Sukuk is a strategic initiative that supports infrastructure development, promotes financial inclusion and deepens the domestic securities market.

Since the establishment of the initiative in September 2017, Nigeria has issued four sovereign sukuk: 2017 (N100 billion), 2018 (N100 billion), 2020 (N162.557 billion), and 2021 (N250 billion).

According to the statement, this year’s total sovereign sukuk issuance moved to N742.557 billion.

“The Debt Management Office (DMO) is pleased to inform the public of the successful conclusion of the issuance of N100 billion sovereign al ’ijarah sukuk. The offer for N100 billion opened on November 21, 2022, and was supported by wide public sensitisation to encourage subscription from diverse investors, particularly the retail investors,” the statement reads.

“The initial offer size of N100 billion was upsized to N130 billion due to the over 165 percent subscription level. The Sukuk was issued at a rental rate of 15.64 percent per annum. This brings the total sovereign sukuk issuance to N742.557 billion as at date.”

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CBN Limits Withdrawal To N100,000 Weekly

The Central Bank of Nigeria (CBN) on Tuesday slashed the cash withdrawal by an individual to N100,000 per week by an individual.

The apex bank also fixed N500,000 as the amount a company can withdraw in a week.

By this new policy, account holders can only withdraw a maximum of N100,000 weekly through Automated Teller Machine (ATM), subject to a maximum of N20,000 daily withdrawal.

Under the new policy, which is to take effect from January 9, 2023, the maximum cash withdrawal via Point of Sale (POS) shall also be N20,000 daily.

This was contained in a circular issued by the CBN on Tuesday, signed by director of banking supervision, Haruna Mustafa and addressed to deposit money banks and other financial institutions.

According to the circular, deposit money banks and other financial institutions are also mandated to ensure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively, per week.

It further indicated that all cash withdrawals in excess of the stated limits will attract processing fees of 5 per cent and 10 per cent respectively.

The new policy also states that third party cheques in excess of N50,000 shall not be eligible for over the counter payment, while extant limits of N10,000,000 on clearing cheques subsist.

“Only denomination of N200 and below shall be loaded into the ATMs.

“In compelling circumstances not exceeding once a month, where cash withdrawals above the prescribed limits is required for legitimate purposes, such cash withdrawals shall not exceed N5,000,000 and N10,000,000 for individuals and corporate organisations respectively, and shall be subject to the references processing fees in (1) above, in addition to enhanced due diligence and further information requirements,” the circular stated.

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