Stamp duty: Unending controversy and its whirlwind effects
Nigerian Postal Service and the Federal Inland Revenue Service are caught in a controversy over which agency should collect revenue generated from stamp duties, EVEREST AMAEFULE reports
Aformer Acting Postmaster General of the Federation, Mr Enoch Ogun, lost his plum job on March 29, 2016. The reason was the controversial stamp duty.
The day before Ogun’s sacking, The Punch had reported that the Nigerian Postal Service was on a collision course with the then Minister of Communications, Adebayo Shittu, over the appointment of agents for the collection of stamp duty.
NIPOST had interviewed 30 companies that wanted to serve as stamp duty agents. The minister said the postal organisation had not secured approval to hire the agents and he felt that the interview was an affront.
Just before Ogun’s removal, an aide to the minister had said, “The Minister of Communications, Adebayo Shittu, has received information that a committee purportedly raised by the acting Post-master General has commenced the process of appointing agents to collect stamp duty on behalf of the Nigeria Postal Service and, by implication, on behalf of the Federal Government.
“The minister hereby serves this warning that NIPOST has not been authorised to appoint new agents, in respect of the collection of stamp duty.”
He added, “The Federal Government has projected an accrual in excess of N2.5tn from the payment of stamp duties from the financial services industry as outlined by the Central Bank of Nigeria.
“This is indeed a significant contribution to national revenue pegged at N3.8tn in the 2016 budget. It needs no emphasis to state that the government places a big premium on earnings from the enforcement and diligent collection of stamp duty.”
Only recently, Bisi Adegbuyi, also lost his job as the helmsman of NIPOST. That was just a few days after he faulted the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, on the balance in the Stamp Duty Account domiciled in CBN.
A few days earlier, the labour union in NIPOST had protested at the National Assembly, and picketed the Abuja headquarters of the Ministry of Finance over the move to cede the duty collection to FIRS.
The workers held that Ahmed wanted to kill NIPOST, accusing her of masterminding the proposed plan to cede the collection of stamp duty to the Federal Inland Revenue Service.
It is clear that the stamp duty inspires and ignites controversy everywhere.
The FIRS contends that it has the sole responsibility for the collection of all taxes and duties in the country.
NIPOST, on the other hand, is the repository of stamp, the historical product from which the stamp duty was introduced into the country for the first time on April 1, 1939 by the British Colonial Government through the Ordinance 15 of 1939.
As early as 2016, Ogun had confirmed to our correspondent an attempt by the FIRS to wrestle stamp duty from the postal organisation, but he added that government officials led by the Revenue Mobilisation, Allocation and Fiscal Commission were working to resolve the controversy.
He said, “It is clear that FIRS collects taxes and duties. There is no doubt about that.it is also not in doubt that we (NIPOST) are the custodians of stamp. So we are sister government agencies. Instead of looking at the revenue as belonging to agencies, you should look at it as government revenue.”
Although the stamp duty was introduced into the country by the colonial government since 1939, the culture of affixing stamp on legal documents kept dying with time. The Stamp Duty Act of 2004 was a major attempt at reviving it. The legislative document, however, could not do the magic.
NIPOST therefore continued to seek ways to revive the duty, especially as it faced the challenge of dwindling revenues due to the advent of new communication technologies.
It hired consultants, employed agents and held workshops - all in a bid to revive the pervasive use of stamps through the campaign that the documents of transactions were not yet legal until they had postage stamps affixed to them as required by the Stamp Duty Act.
The consultants told the postal organisation that it could make as much as N2.5tn per annum if the Stamp Duty Act was properly implemented.
In a document developed from one of its consultants’ investigation, the postal organisation said stamp duty could turn its fortunes around.
It said, “It has become another major source of revenue for the Federal Government. This position is reinforced by the outcome of an investigation carried out in conjunction with a consultant to NIPOST, which put a conservative estimate of N2.5tn as loss to the country as a result of the failure of financial institutions to adhere to the implementation of the Stamp Duty Act in the year 2014 and that was in the financial institutions alone. “The implication of this is that the implementation of the Act has opened a new revenue drive, which is a relief to the Federal Government.
“It is gratifying and exciting to know that well over 20 private companies now partner with NIPOST as stamp duty agents and more applications are still inbound.”
The elixir for NIPOST seemed to have come when the Central Bank of Nigeria bought into the revenue potential of stamp duty.
It directed all Deposit Money Banks in the country to deduct N50 stamp duty for electronic transfers with a value of at least N1, 000 and transfer the same to a NIPOST Stamp Duty Account domiciled in the apex bank.
However, the elixir was short-lived. One company that claimed to have been appointed by NIPOST as an agent, Kasmal, had gone to court to ask the banks to remit all the monies they should have collected as stamp duty since 2004 when the Act was passed.
Kasmal got a favourable judgment, which was challenged in the Lagos Appeal Court.
Ruling on an appeal filed by Standard Chartered Bank against Kasmal International Services Limited and 22 others, Justice Ibrahim Saulawa and four other justices of the Court of Appeal, Lagos Judicial Division, held that the Stamp Duty Act 2004 did not impose a duty on DMBS to deduct N50 on bank deposits.
Kasmal International Services Limited, which belongs to Senator Buruji Kashamu, had on February 17, 2014 obtained the judgement of a Lagos High Court against the banks.
The banks were required to remit more than N6bn, which they were supposed to have collected on deposits since the Stamp Duty Act of 2004, to NIPOST.
According to Kasmal, NIPOST had appointed it as an agent to collect the stamp duty on its behalf from the banks. Therefore, the banks should remit the monies accruing as stamp duty through it to the postal organisation.
However, in a lead judgment, Justice Saulawa held that the Stamp Duty Act imposed no such duty on the banks.
In concurring rulings delivered by a panel of Appeal Court, Justices Ejembi Eko, Adamu Jauro, Moore Adumein and Nonyerem Okoronkwo agreed in totality with the ruling delivered by Justice Saulawa.
Instead of obeying the ruling of the court, NIPOST and the Federal Government prepared a new stamp duty bill to fill the vacuum pointed out by the Court of Appeal.
The new bill proposed a number of changes, including capturing electronic transfers, raising the threshold of deposits on which stamp duty is to be paid as well as the exemption of children education accounts.
While the bill lasted in the National Assembly, the Ministry of Finance consolidated a number of executive bills that would affect the revenues of the government; thus, the finance bill.
It was in the process of law making that the FIRS had its responsibility to collect stamp duty inserted in the version of the bill that was passed by the House of Representatives. This was like petrol added to a bushfire.
Beyond the fight for turf between FIRS and NIPOST is pecuniary interest and self-preservation.
The tax agency takes four per cent of the proceeds of the taxes and duties it collects as the cost it incurs for collection. If it gets the stamp duty into its portfolio, it will increase what accrues to the agency.
NIPOST, on the other hand, has not pretended that it wants to join the league of revenue generating (or collecting) agencies and therefore be entitled to getting a percentage, too.
Another controversy that emanated from the stamp duty was on remittances by the banks. Available records show that remittances into the stamp duty account is far from the projections that NIPOST and the Federal Government had made.
This had prompted NIPOST to begin the process of hiring auditors to audit the books of commercial banks in order to show how much they had actually collected.
Again, the postal organisation was stopped. The process was aborted as the RMAFC claimed that it was its responsibility to conduct the probe.
Speculations, therefore, remain that the banks are feeding fat on the stamp duty while the controversies abound.
As these controversies were not enough, merchants started deducting the sum of N50 as stamp duty on Point-of-sale transactions. That has sparked another division in the stamp duty controversy.
Minister of Communications and Digital Economy, Isah Ibrahim (or Pantami, if you want to open and close a bracket), has now taken the battle to the President, Major General Muhammadu Buhari (retd.).
Although he claimed to have been informed of the raging controversy late, Ibrahim said the government had not yet taken the decision on whether the duty would remain with NIPOST or ceded to FIRS.
The minister said, “To me, stamp duty should be collected by NIPOST, the same way the Nigerian Customs Service collect customs duties.”
The question now is: How will Buhari respond to the controversy?
Even more fundamentally, some Nigerians are asking: should bank customers continue to pay stamp duty when a court says the law did not envisage electronic transfers?