Towards Fair, Equitable Stamp Duty Administration

The Stamp Duty Act presents ample opportunity for the federal government to boost tax revenue and bolster its fiscal position but the obscurity beclouding its administration calls for concern, writes James Emejo

Faced with increasing fiscal challenges occasioned by dwindling oil revenues and the direct consequence of an economy which is not fully diversified, the various tiers of government are increasingly under pressure to boost domestic revenue drive to meet their obligations to the people.

Also, the adverse impact of the COVID-19 pandemic on the economy, as well as increasing debt service obligations by the government had further strained the public purse, reinforcing the need to broaden the tax net to improve revenue collection.

One of the areas recently identified by the government that needs improved tax receipts is the Stamp Duty.

The federal government had through the Finance Act reviewed its policy on stamp duty charges which was levied on electronic payments, thereby imposing a N50 stamp duty charge on electronic payments above N10, 000 as against payment above N1, 000.

The Act repealed a provision of the Stamp Duty Act 2014, which holds the threshold for receipts chargeable on stamp duty as N4 and above.

In 2016, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, while attesting to the potential of the stamp duty, pointed out that at a period when oil revenue posed a huge challenge for the government, the CBN was left with no other choice but to increase support for the fiscal authorities to seek other ways to boost revenues, adding that the stamp duty remained a viable alternative to increase tax collection.

The CBN governor said, “We will try as much as possible, working with the banks to ensure that all transactions are captured in a way that ensures that for every transactions of N1000 and above, each of those transactions get debit for N50.”

Emefiele at the time said the total amount, which the government hoped to generate from stamp duty was still unknown.

“We’ve not dimensioned it yet but in due course, I believe Nigerians would begin to know what this would translate into but we believe it would help the efforts of government to improve its revenue.”

Recovery

However, in July 2020, the federal government directed the Federal Inland Revenue Service (FIRS) to recover all stamp duties collected on behalf of the federal government, which were yet to be remitted by government agencies, banks and other companies.

The Secretary to Government of the Federation (SGF) Mr. Boss Mustapha gave the marching order while he inaugurated the inter-ministerial committee on Audit and Recovery of Back Years Stamp Duties and the launch of the FIRS adhesive stamp.

While reiterating the federal government’s determination to strengthen stamp duty collections, he added that the tax had potential to yield about N1 trillion annually if properly harnessed.

According to the Executive Chairman of FIRS, Mr. Mohammad Nami, total stamp duty collection between January and May 2020 totaled N66 billion, adding that N18 billion was generated in 2019 fiscal period, attributing the improvement to the trigger provided by the amendment to the Finance Act 2019.

However, by August 2020, Nami, while providing an update on the stamp duty to members of the National Assembly, pointed out that the country generated about N3 billion weekly from the duty tax from May till August through Deposit Money Banks (DMBs).

In addition, a recent insight by the Danne Institute for Research indicated that stamp duty revenues increased by over 1,759 per cent to N120.15 billion in 2020 from N6.46 billion in 2011.

Although the implementation of the SDA had so far shown promising results in the amount of fiscal buffers it could provide for government, its current administration had been fraught with challenges as stakeholders described it as arbitrary.

The stakeholders believed that unless these numerous concerns are adequately addressed, the full potential of the stamp duty tax may never be realised.

Stamp Duty and VAT

Experts also believed that in its current state, the stamp duty seemed to clash with the Value Added Tax (VAT), a situation, which amounted to double taxation by exacting both taxes on an instrument.
There are also the challenges of identifying instruments, which are eligible for stamp duty among other frailties in the Act.

Only recently revenue authorities including the Federal Inland Revenue Service, Joint Tax Board (JTB) and internal revenue boards from the 36 States of the federation agreed to push for the amendment of the Stamp Duty Act to resolve inherent grey areas that had limited its effective administration in the country.

The stakeholders at the 148th meeting of the JTB, themed: “Achieving Effective and Efficient Administration of Stamp Duties and Other Related Taxes for Enhanced Revenue Generation in Nigeria,” emphasised on the need to overhaul the existing Act to reflect current reality.

According to them, the duty stamp Act represented an old law mainly backed by the Stamp Duty Act of 1939 and which is no longer in alignment with the dynamics of the present times.

The further argued that a situation whereby both VAT and stamp duty is charged on same instrument amounted to multiple taxation with could further harm the business environment.

Nami, at the occasion had described the stamp duty as a “stone that was rejected by the builders, and before our very eyes, it is becoming a corner stone in the annals of revenue generation in our country” adding that the potential of the stamp duty had given rise to other non-tax entities which have sought to encroach into the territory of tax administration “just to savour from the new gold of revenue generation in the country.”

He pointed out that the stamp duty had increasingly become a controversial topic mostly as a result of ignorance and a misapplication and misrepresentation of constitutional provisions and extant tax laws adding that these challenges were also capable of truncating the effective and efficient administration of other related taxes, including capital gains tax, property taxes, among others.

The FIRS boss admitted that there are new challenges confronting tax authorities, adding that these posed a huge hindrance to the administration of stamp duties in the country unless addressed.

He said,” As long as these challenges exist, achieving effective and efficient administration of stamp duties may be a long shot, and this will be to the detriment of not just the national economy, but to the
tax paying public as well.”

Reform

Also, speaking on the issues, Managing Consultant at Pedabo Audit Services, Mr. Albert Folorunsho, said there are lots of things in the current stamp duty Act, which are no longer relevant to current realities.

He told THISDAY, “There is a definite need for immediate reform of that law specifically to address who is to pay stamp duty, what is the timeline for the payment of stamp duty, what is the instrument that are really relevant for stamp duty right now.

“Do you still need to stamp all of those instruments that are listed in the provision which was put there when VAT wasn’t in existence?

“Now we have VAT on some of those transactions and we are still charging stamp duty on the same transaction. These are some of the areas that need to be reformed. We know that stamp duty needs to be adjudicated; somebody has to determine what stamp duty is applicable to a particular instrument.”

Earlier in his presentation to the gathering on “Achieving Effective and Efficient Administration of Stamp Duties and Other Related Taxes for Enhanced Revenue Generation in Nigeria”, Folorunsho said that the existing SDA remained obsolete while the provisions do not communicate certainty, the party responsible to pay including payment timelines, mode of stamping, rates, penalties among others.

He pointed out that except for company registration at the Corporate Affairs Commission (CAC) and perfection of title at states’ land registries, the SDA as a statute is largely overlooked.

He said while its administration had been arbitrary, inadequate training for revenue officers on stamp duties was another limitation.

Furthermore, the tax expert said contrasting rates between SDA and FIRS/JTB circulars had only helped to create more confusion and provided fuel for resistance by the public.

Also, lack of data to track compliance has made stamp duty transactions between individuals within the same state hard to establish.

The current Act also lacked clarity on who should collect the stamp duty on electronic transfers.

Among other things stakeholders said Nigerian stamp duty law – Stamp Duties Act which was first enacted in 1939 had not undergone any major amendments to date except for the slight amendments by Finance Acts 2019 and 2020, adding that this explains why the stamp duty had been a successful source of internally generated revenue over time.

However, Secretary of the JTB, Obomeghie Nana-Aisha, told THISDAY that the meeting hoped to look at areas not hitherto being exploited or where revenue generation had been low adding that one of the main focus was the stamp duty, particularly taxes that could be generated from all the dutiable items but which are hitherto not administered.

She said, “The Stamp Duty Act is a very old Act perhaps adopted from the British tax laws. But as the economy and things evolve, there’s the need for us to fine-tune and re-enact the Stamp Duty Act.

“Though some part of it has been touched by the Finance Act of 2019 and 2020, but there is need for holistic overhaul.”

Nana-Aisha said, “This is the time to overhaul the stamp duty Act and what we are also looking at today is that stamp duty cannot go on the same item that the VAT is also going for so as to reduce the multiplicity of taxes in Nigeria.

“These are the areas we are looking into and we also specify who is supposed to pay the stamp duty. These are the areas that the existing Act currently did not take care of.

“And other instruments that ordinarily people are sceptical about is, how do I administer, how do I administer or the rates.”

Further highlighting the lapses inherent in the existing Act, she said, “Sometimes, it is the taxpayers who tells the tax collector this is what I am going to pay, whereas, these things are supposed to be well spelt out.
“It is the tax collector who is supposed to educate the taxpayers and not the taxpayer educating the tax collector on how much he or she is willing to pay on stamp duty.”

Way Forward

In charting the way forward for the smooth administration of the stamp duty however, Folorunsho called for an overhaul of the SDA to align with current realities and best global practices.

He said this would among other things ensure clear identification of responsible parties and/or collection agents restrict the dutiable instruments to land and securities transactions, identification of stamp duty rates per transaction as well as refund option in the case that remittance ends with the wrong authority.
He also called for review of existing incentives/exemptions for current relevance as well as shifting the focus from agency parties to instruments relating to the underlying transactions.