Legality of FG’s stamp duty charges
Lawyers have criticised the decision to continue with the implementation of the Stamp Duty policy by the Federal Government as revenue means despite a latest court order nullifying it for being illegal and unconstitutional.
Bank customers from April and May have been inundated with text and electronic messages informing them of the deduction of N50 from any transaction above N1000. The banks said it is in compliance with the Stamp Duties Act & Federal Government Regulations Act of 2009. CBN has directed that a stamp duty charge of N50 be paid on every single deposit over N1, 000 either by teller or electronically to the Federal Government by the account holder.
One of the banks said it will be “collecting this charge on Thursday, 4 May 2017 for the period of Dec 1, 2016 – March 31, 2017.”
An earlier judgment of February 24, 2016 by a Federal High Court in Lagos in suit No FHC/L/ CS/1710/2013 filed by Kasmal International Ltd to enforce its contract with Nigeria Postal Service (NIPOST) to collect the N50 stamp duty upheld the agreement which is in compliance with the provisions of the Stamp Duties Act, 2003. Another judgment on April 12 by another Federal High Court declared the policy illegal and unconstitutional.
The judgment by Justice Gabriel Kolawole in a suit filed by the Nigerian Bottling Company (NBC) against the Nigerian Postal Service (NIPOST) held that NIPOST was not empowered by the Stamp Duties Act 2004. He said whereas the Act recommended 2 kobo stamp to be affixed on certain categories of documents, NIPOST lacked the power to arbitrarily increase the amount to N50 without firstly obtaining an amendment of the Act through the National Assembly.
“A law is a law and has to be obeyed or implemented as it is. Section 89 of the Stamp Duties Act which recommended the use of adhesive 2 kobo stamp on certain categories of receipts and document is the law in force,” the judge said.
“The NIPOST as a defendant in this suit acted unlawfully, illegally and ultra-vire by unilaterally increasing the 2 kobo stamp to N50 without any back up law and under the guise that 2 kobo stamps are no longer in circulation in Nigeria.
“Under section 89 of this Act, the NIPOST has no power to compel the plaintiff (NBC) to affix N50 stamp on its receipts and other documents.
“By this, NIPOST has no business or authority in sending Kasmal International Services on illegal errand to compel the plaintiff on the N50 stamp duty tax,” he added.
A senior state counsel in the Office of the Attorney General of the Federation (AGF), who pleaded anonymity, said the agencies involved in the implementation of the policy ought to comply with the order of court or appeal against it, or rather wait until the Act is amended. The official said the AGF cannot advice a party to disobey order of court.
The Federal Government through the Central Bank of Nigeria (CBN) on January 19 directed that N50 stamp duty be made on all transactions including bank electronic transactions above N1000. The policy is aimed at boosting the country’s revenue base through nonoil sectors such as taxes and rates.
“It is in recognition of this fact that banks and other financial institutions are enjoined to support government’s revenue drive through compliance with the provisions of the Stamp Duties Act LFN 2004,” the CBN stated.
With oil prices plummeting, Federal Government plans to raise up to N5 trillion through stamp duty, which is expected to not only be collected from bank transactions but through court processes, statements at police stations, land title documents, agreements among others.
A bank official told Daily Trust that the banks are simply working on directive from the CBN and Federal Government.
The chairman of the NIPOST Committee on stamp duties, Usman Shaaba said the decision to impose the minimum postage rate of N50 in place of the preexisting 2 kobo on N400 transaction was taken by the NIPOST and the Accountant General of the Federation.
He explained that the Bill for the amendment of the Act has since passed first reading in the National Assembly and is also fixed for public hearing on May 24.
He said more awareness needs to be created on the need for compliance in the policy, explaining for instance that properties establish a property’s value and proof of ownership unlike those without stamp duty.
“The N50 stamp for some transactions above N1000 can be reviewed to N5, 000 worth of transactions, we are still looking at that. But any transaction less than N1000 is not dutiable,” he said.
The Senate Committee Chairman on Rules and Business Baba Kaka Bashir Garbai confirmed that the bill is being considered at the Senate.
Reacting, Abuja based lawyer Hamid Ajibola Jimoh said the charges cannot be executed without the National Assembly first amending the Stamp Duty Act.
“If there is any change in the naira, it is the same National Assembly that should be approached to amend that provision. Nobody can legislate another act when the main provision said that certain persons have delegated legislation-that is maybe the director general has power to review from time to time and that is now pursuant to the Act,” he said.
Also speaking, E.M.D. Umukoro said it is illegal and ultra vires for CBN to implement the policy by charging monies outside that provided by the existing Act without first amending the Act.
Also reacting, Barr Abdul Mohammed said taxation imposition is not legal when done by policy.
“It must be done based on existing law not hiding behind a 2009 Financial Regulation which did not empower the CBN to increase and impose such taxes,” he said.