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

The Punch - - PANORAMA -

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 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?

•Ahmed •Adeg­buyi

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