Recovering stamp duty liabilities, by Jide Ayobolu

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The Federal Government recently inaugurated an Inter-Ministerial committee to recover outstanding tax liabilities collected between January 2016 and May this year.

The Secretary to the Government of the Federation, Boss Mustapha inaugurated the committee in Abuja. Mustapha while inaugurating the committee charged them to ensure that they recover all Stamp Duty on behalf of the Federal Government but yet to be remitted by collecting agencies.

He said the need to recover the Stamp Duty became imperative due to the dwindling revenue of the government which was caused by the negative impact of the Coronavirus pandemic. He said the impact of the pandemic had led to a budget deficit of over N5trn.

He said, “The government has recognised the fact that for any meaningful development to be achieved, it has to look inward to use every available means to shore up its revenue generating capacity.

“For too long, the country has depended on oil as the main cash cow of the economy even though it is richly endowed with other viable revenue yielding sources. “In the face of dwindling oil revenue, it is even more compelling now to begin to think out of the box in order to safeguard the future of our country.”

He said the administration has resolved to widen the revenue base by activating the Stamp Duty revenue collection which has been neglected for more than 20 years.

The SGF said the revenue from Stamp Duty would be focussed on as it has the potential to yield up to N1trn annually if properly harnessed. He said the committee is being inaugurated to serve as a timely intervention and ways to augment the Federal Government revenue generation capacity while avoiding sliding back to recession.

It is important to point out that the Federal Inland Revenue Service (FIRS) has generated the sum of N66 billion from stamp duties between January and May.

The FIRS Director, Communications and Liaison Department, Abdullahi Ahmad, made this known in a statement in Abuja. Mr Ahmad said the Executive Chairman of FIRS, Muhammad Nami, disclosed this at the inauguration of the Inter-Ministerial Committee on Audit and Recovery of Back Years Stamp Duties and the unveiling of the FIRS Adhesive Stamp in Abuja. Mr Nami said the money realised in the first five months of the year from stamp duties represented about 1,000 per cent increase. He stated that the increment was unprecedented when compared to six billion naira collected from January to May 2019.

The FIRS boss attributed this increase to the dynamism triggered by Finance Act 2019, sums warehoused by the CBN in respect of prior years and the deployment of technology as well as stakeholders’ collaboration.

“The introduction of the FIRS Stamp Duties Adhesive Stamp will, among other things, plug the revenue sink-hole, enable proper accountability and transparency, simplify administration of Stamp Duties and reduce disputes”.

The statement disclosed the Secretary to the Government of the Federation (SGF), Boss Mustapha, gave the assurance that the collection from stamp duty would be second to oil revenue, as it had the potential to yield up to a trillion Naira if properly harnessed.

Mr Mustapha also directed that all institutions of government and related stakeholders should support the Inter-Ministerial Committee on Audit and Recovery of Back Years Stamp Duties to enable it succeed on its assignment.

‘In the face of dwindling oil revenue, and the global shift away from oil dependent technological products, it is even more compelling now to begin to think out of the box in order to safeguard the future of our country.

“Therefore, this administration has resolved to widen the revenue base by activating stamp duties revenue collection which has been neglected for more than 20 years.

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“I hereby also direct and request that all relevant MDAs, particularly the Central Bank of Nigeria, NIBBS, MDBs, FIRS, NIPOST should give maximum cooperation to the Committee in the discharge of its mandate.” Mr Mustapha said.

Recalled that, Nigeria has so far earned N45.8 billion naira from stamp duties following recently introduced reforms, the former Chief Executive Officer, Nigerian Postal Service (NIPOST) Bisi Adegbuyi, has said.

The NIPOST former boss revealed that the federal government had raked in over N45.8 billion from stamp duties following the reforms introduced by President Muhammadu Buhari’s administration.

“What we have generated as of Friday, December 13, 2019 is N45.8 billion. The account was created in the name of NIPOST to collect the N50 stamp duty charges which is different from what FIRS is collecting,” he said.

He refuted the claim of a brewing conflict between NIPOST and the Federal Inland Revenue Service (FIRS) over the remittances of stamp duties.

“A circular was issued from the office of Accountant General of the Federation to both FIRS and NIPOST, that FIRS should collect access duties on contract agreement while NIPOST is to collect physical and electronic charges (N50) on items that are not accessed such as receipts, employment letters, Birth Certificates and so many other things,” he said “There is actually no conflict as far as NIPOST is concerned between it and FIRS on the matter of stamp duty collection.”

At some point the Minister of Communications and Digital Economy, Isa Pantami, directed the termination of cash payment in NIPOST offices in Nigeria. The directive is to stop corruption in cash transactions. The minister said all payments across NIPOST offices in Nigeria should be made through Point of Sales (POS) machines or bank teller. Mr Adewuyi revealed that the agency had not derailed from its responsibility of production, printing and sales of stamps and had moved from manual to electronic stamps.

He said the agency is currently undergoing digital transformation that would change the narrative of postal services in the country. According to him, NIPOST had deployed ICT solutions/platforms to attain about 70 per cent automation of all its systems and operations across the country and by 2020 the systems would be fully automated.

For NIPOST, he said, leveraging on digital technology to address the socio-economic problems confronting the nation was eminent. “What we are doing currently is to change the narratives of the postal service system in Nigeria by leveraging technological platforms to drive financial inclusion,” he said.

He added that the new initiative seeks to create job opportunities, enhance access to credit for small and medium scale business and assist the government to address the current security challenges.

“We are currently partnering with JAMB, NIMC and other institutions and agencies of government to make our operations robust particularly in the financial services sector, e-governance, remittances, parcel and postal services.

“The CBN has also granted NIPOST the license for money transfer because of our large presence in all the local government councils in the country.

“We are aggregating all the e-government centres, Road Safety, Immigration Service, amongst others to ensure that the common man will benefit from them through the Postal Service System,” he said, adding that payment of pensions to retirees in rural settings through the Postal Service system would reduce “the stress associated with pension payment and lots of lives would be saved as well from the risks associated with travelling.”

Stamp duties are taxes levied on instruments executed by both companies and individuals.

The duty rates vary depending on the types of instruments or nature of transactions and these may be flat charges or ad valorem charges (i.e. percentage of the value of the transaction). Stamp duties are payable on instruments such as tenancy agreements, bills of exchange, promissory notes, receipts, transfer agreements, mortgage, insurance policies, share capital, guarantees amongst others.

The Federal Government is the only competent authority empowered to impose, charge and collect duties on eligible instruments if such instruments relate to matters executed between a company and an individual, group or body of individuals. State Governments are empowered to collect duties in respect of eligible instruments executed between persons or individuals.

It is necessary to understand that stamp duty provides legal protection over landed properties and interests in land generally. It is one of the steps in perfecting legal title to a property.

Without stamping, an owner’s title to property is merely equitable and not completely secured. Paying stamp duties brings such transactions under the radar of the Nigerian legal system and makes such instruments admissible in court as evidence. If an agreement is not stamped, a litigant cannot present it as evidence of his / her interest in court.

Stamp duties serve as a source of revenue for the government, which is an important resource used in improving the economic environment for MSMEs and businesses generally in Nigeria.

Instruments should be stamped on the date of first execution in Nigeria or before its first execution. Failure to stamp on or before its first execution attracts a penalty of 10% and an interest of 19% per annum. Where an instrument has already been executed, but has not been stamped or is insufficiently stamped, the instrument may be stamped at any time within forty days from the first execution thereof.

The Federal Inland Revenue Service has made efforts to make payment of stamp duties easier and seamless for taxpayers by implementing an online platform, which enables taxpayers to pay stamp duty from anywhere and at any time. With an increased drive for increased revenue, it is imperative for MSMEs to ensure compliance with stamp duty provisions to ensure maximum protection under the law.

Although the new revenue drive of the Federal Government, through the imposition of N50 stamp duty by the Central Bank of Nigeria (CBN) on transactions from bank accounts to financial institutions may be a fiscal strategy to boost national earnings, the constitutionality of this act, which is already in force, is an issue that discerning Nigerians would want the government to reconsider.

In a circular directing banks to strictly implement the new policy, the CBN explained: “As part of the efforts to boost its revenue, the Federal Government is exploring revenue opportunities in the non-oil sector, especially taxes and rates.”

The circular went further to advise that: “Banks and financial institutions are enjoined to support government’s revenue generation drive through compliance with the provisions of the Stamp Duty Act (2004).”

By this provision, the N50 stamp duty would be charged per transaction in respect of teller deposits and electronic transfers for the value of N1000 and above.

Pundits of the revenue drive have even speculated that projected earnings of N2.5 billion are accruable daily from the N50 stamp duty policy. However, as exciting as this projection seems, the burden of this charge on customers as well as the question of how equitable it would be are somewhat worrisome.

Traditionally, stamp duties are administered for agreements, purchases involving large sums, importation of goods, and sundry transactions demanding receipts, any of which government agencies could capitalize on.

Thus, Section 89(2) of the Stamp Duty Act of 2004 states: “Every receipt given by any person in acknowledgement of good produced or services rendered should be denoted by an adhesive postage stamp worth N50 issued by the Nigerian Postal Service.”

Pray, as it concerns cash deposits and electronic money transfers, how are stamp duties supposed to be administered? Is it a fair deal? Why would one be made to pay for receiving one’s own money?

What is the legality of the imposition? If a student pays or transfers N1000 into his current account, and a Senator does the same for N5 million, does it make sense equitably to administer a N50 stamp duty for both? It would seem therefore that the only logical sense in this administration of stamp duty is money-driven, through taxation of poverty.

The CBN directive to banks is faulted for being a rehash of the wanton arbitrariness for which government agencies are notorious. Puffed up by the inanities of dubious power, government agencies are often in the breach, or outright denial of constitutional provisions that guide their operations.

A case that brings this to bold relief is the candid observation of the Nigeria Employers’ Consultative Association (NECA), which has drawn the attention of the public to a pending court case on some imposed stamp duty charges.

A recent press release reportedly issued by the Director-General of NECA, Olusegun Oshinowo, stated that there was a pending case at the Court of Appeal on the stamp duty matter between Kasmal International Services Limited and Access Bank & 23 others.

If this is the case, why should the CBN overlook the pending court case? What example is the apex bank putting up by the way it administers its own processes?

Besides, the imposition of stamp duty is an indirect tax regime, and the CBN constitutionally does not have the power to either administer the stamp duty act or impose a tax.

The power to administer the Stamp Duties Act falls within the purview of the Commissioner for Stamps as provided for in Section Six of the Act. Constitutionally, only the National Assembly has the powers to impose tax.

The inconsistency surrounding the management of charges, be it Commission on Transactions (CoT) or the stamp duty, is yet another demonstration of policy insecurity and vacillation of the apex bank in the management of information relating to its internal workings.

Only last year, the CBN announced, in a circular titled “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” that in January 2016, it would implement a zero-commission on turnover, thereby prohibiting banks from deducting CoT. Now, it seems it has turned around to take with the left hand what it has already relinquished with the right.

The decision to impose stamp duty as a way of taxing Nigerians to generate revenue is an ingenuous way to revamp the country’s dwindling economic fortunes.

Ayobolu, a public affairs analyst contributed this piece from Lagos State

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