Ayo Ola
The Managing Consultant of Maroct Consultants Group, Mr. Uzoma Francis Ubani, (FCTI) has petitioned the Attorney-General of the Federation, Abubakar Malami; the President of the Senate, Ahmad Ibrahim Lawan; Speaker of the House of Representatives, Olufemi Hakeem Gbajabiamila; Nigerian Governors’ Forum; The Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed; the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad M. Nami; and the Executive Secretary, Joint Tax Board (JTB) over Section 27 of the Finance Act, 2021.
Ubani, in the letter, argued that Section 27 was unconstitutional and needless.
The letter was titled, “Update on the unconstitutionality of Section 27 of the Finance Act, 2021, and an explanation of why the Section is needless.
The letter read: “Further to our letter dated Friday, January 7, 2021, we respectfully write to critically examine and discuss in detail the issues surrounding the Stamp Duties Act.
“LET US LOOK AT SECTIONS 162 AND 163 OF THE CONSTITUTION OF THE FEDERAL REPUBLIC OF NIGERIA, 1999, AS ALTERED.
“PUBLIC REVENUE/DISTRIBUTABLE POOL ACCOUNT
Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as amended, enjoins the Federation to maintain a special account to be called “Federation Account” into which shall be paid ALL revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the Armed Forces of the Federation, the Nigerian Police Force, the Ministry or Department of government charged with the responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.
Section 162 (10) (a) of the said Constitution provides thus:
162 (10) “For the purposes of subsection (1) of this section “revenue” means any income or return accruing to or derived by the Government of the Federation from any source and includes –
(a) any receipt, however, described, arising from the operation of any law…”. Thus, stamp duties could be said to constitute “revenue” within the meaning of this section.
“However: Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered, provides thus:n“Where under an Act of the National Assembly, tax or duty is imposed in respect of matters specified in item D of Part II of the Second Schedule to this Constitution, the net proceeds of such tax or duty shall be distributed among the States on the basis of derivation and accordingly –(a) where such tax or duty is collected by the Government of a State or other authority of the State, (such as SIRS) the net proceeds shall be treated as part of the Consolidated Revenue Fund of the State; (In line with Section 4(2) of the Stamp Duties Act)
(b) where such tax or duty is collected by the Government of the Federation or other authority of the Federation, (such as FIRS) there shall be paid to each State, at such times as the National Assembly may prescribe, a sum equal to the proportion of the net proceeds of such tax or duty that are derived from the State”. (In line with Section 4(1) of the Stamp Duties Act)
Paragraph 7 (Item D), Part II of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999, as amended, which is on Concurrent Legislative List provides thus:
“In the exercise of its powers to impose any tax or duty on – (a) Capital gains incomes or profit of persons other than companies; and (b) documents or transactions by way of stamp duties
The National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty or the administration of the law imposing it shall be carried out by the Government of a State or other authority of a State”. (Such as States’ IRS).
“Uwais, CJN (as he then was) in interpreting the above-cited provisions of the 1999 Constitution, in the case of Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation (2010) 2 N.T.L.R. 902 at 943 para. F 944 para. B) held:
“It seems to me that the provisions of Section 162 Subsections (1) and (10) of the 1999 Constitution, are general in nature, while those of Section 163 (b) of the Constitution, which deal in particular with Capital Gains Tax and Stamp Duties are specific. Therefore, the latter provisions override the former for generalibusspecialia derogant (i.e. special things derogate from general things). There are the Capital Gains Act, Cap 42 of the Laws of the Federation of Nigeria, 1990, as amended and Stamp Duties Act, Cap. 411 which are “existing laws” under Section 315 of the 1999 Constitution. However, the Acts do not contain provisions pursuant to Section 163 of the 1999 Constitution, and as of now the National Assembly has not prescribed how the net proceeds of such tax or duty are to be distributed among the States on the basis of derivation”.
“DISTRIBUTION OF PROCEEDS FROM STAMP DUTIES:
In view of the Supreme Court decision in Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation (supra) the National Assembly has put the requisite legislation under Section 48 (4) of the Finance Act, 2020, for the distribution of the proceeds of stamp duties among the various States of the Federation on the basis of derivation.
How the net proceeds of such tax or duty are to be distributed among the different States of the Federation is now provided under Section 48 (4) of the Finance Act, 2020. It, therefore, follows that there is no basis for the provisions, as currently provided under Section 27 of the Finance Act, 2021, and therefore should be removed and not allowed to subsist.
“The Stamp Duties collected by the Government of the Federation, through the FIRS, under Section 4(1) cannot be paid into the Federation Account as directed by the FIRS, in paragraph 7 of its Press Release on collection and remittances of stamp duties dated 20/7/2020, as doing so would be inconsistent with the provisions of Section 163 of the Constitution of the Federal Republic of Nigeria, 1999.
“It is, in fact, very clear by the provisions of Section 163 of the Constitution under reference, that Capital Gains Tax and Stamp Duties are supposed to be paid, when applicable to the States from which they are derived and not for the benefit, inter alia, of ALL the States, which will be the case were the tax and duties are to be paid into the Federation Account (see Section 162 subsection (3) of the Constitution).
“As currently constituted and administered, the Constitution and the Stamp Duties Act did not permit the infringement by the Federal Government, through the FIRS, into an area which, under the precise and well spelt out separation of powers enshrined in Section 4 (1) and 4 (2) of the Stamp Duties Act, as amended, are within the exclusive preserve of the various States of the Federation.
“Section 8 subsection (1) (c) of the Federal Inland Revenue Service (Establishment) Act, 2007 provide thus: The Service shall:
(c) Collect, recover and pay to the designated account, any tax under any provision of this act, or any other enactment or law. (Including the stamp duties enactment/law).
“In the light of the foregoing, therefore, we are of the opinion that the Federal Government, through the FIRS, should return the sum equal to the proportion of the net proceeds of all the stamp duties that are derived and collected by the FIRS, under Section 4 (1) of the Stamp Duties Act, to the respective “Stamp Duties Account” of the various States of the Federation in accordance with the provisions of Section 163 (b) of the 1999 Constitution of the FRN, as the National Assembly has clearly prescribed in Section 48 (4) of the Finance Act, 2020, forthwith, as anything short of this would be inconsistent with the provisions of the Constitution of the Federal Republic of Nigeria.”
The consultant had earlier in a letter argued that Sections 3(3), 111, 115, and 116 of the Stamp Duties Act, 2004 as amended was inconsistent with the Constitution of the Federal Republic of Nigeria, 1999, as amended.
The letter was titled, “The unconstitutional provision of Section 27 of the Finance ct, 2021, as it is in conflict with Sections 3(3), 111, 115 and 116 of the Stamp Duties Act, 2004 as amended were inconsistent to the Constitution of the Federal Republic of Nigeria, 1999, as amended and therefore null and void to the extent of the inconsistency.”
The letter read: “We respectfully write to bring to your attention and inform you that the provisions of Section 27 of the Finance Act, 2021, which took effect on January 1, 2022, is in conflict with the provisions of Sections 3 (3), 111, 115 and 116 (2) of the Stamp Duties Act, 2004, as amended and also inconsistent with the provisions of Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as amended and it is therefore null, void and of no effect whatsoever, as the powers purported to have been conferred on the Federal Minister of Finance, have already been conferred on the President or the Governor of a State under the above-mentioned provisions of the Stamp Duties Act. More so, the distribution of Stamp Duties revenue is based on DERIVATION pursuant to the provisions of Section 163 of the said Constitution.
“Section 4 (1) and 4 (2) of the Stamp Duties Act, 2004, as amended, clearly provided for what is to be collected between the Federal Government and the State Governments. Therefore it is only the stamp duties and Electronic Money Transfer Levy (EMTL) that is collected by the Federal Government, through FIRS, pursuant to Section 4 (1) of the Stamp Duties Act, that should be distributed according to derivation, pursuant to Section 163 of the Constitution, while the different States of the Federation should collect stamp duties and EMTL, pursuant to Section 4 (2) of the Stamp Duties Act, which currently, the Deposit Money Banks (DMBs) and Financial Institutions have not been complying with, based on the purported Federal Inland Revenue Service (FIRS) Press Release captioned: “Clarification of Administration of Stamp Duties in Nigeria” and the Central Bank of Nigeria (CBN) circulars referenced CBN/GEN/DMB/02/006, dated 15/1/2016, and PSM/DIR/CON/CWO/07/066 dated 8/5/2020, that are not laws and have no binding effect whatsoever.
“Section 27 of the Finance Act, 2021, is blatant illegality in tainted legislation and it is therefore unconstitutional. The Minister cannot have such powers, neither does the National Assembly, without a Constitutional amendment. Therefore, the provisions as currently contained therein should be voided and expunged in their entirety.
“Section 1 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as amended, proclaims its supremacy. Section 1 (3) of the said Constitution further provides that if any law is inconsistent with the provisions of the Constitution, the Constitution shall prevail, and that other law shall, to the extent of the inconsistency be void.
“It appears that the provisions of Section 27 of the Finance Act, 2021, is aimed at or targeting stamp duties accruable to the different States of the Federation under Section 4 (2) of the Stamp Duties Act, 2004, as amended by Section 53 (b) of the Finance Act, 2019, and it is therefore void to the extent that it purports to take over the administration and collection of stamp duties and EMTL under Section 4 (2) of the said Stamp Duties Act, in total disregard to the separation of powers enshrined in Section 4 of the SDA, and contrary to the provisions of Section 163 of the Constitution of the FRN, 1999, as amended.
“Nonetheless, assuming without conceding, that the Federal Inland Revenue Service (FIRS) is the only competent authority to collect the stamp duties and EMTL paid through the banks’ platform, the duties/levies collected are NOT by LAW, to be paid into the Federation Account as clearly stated in paragraph 7 of the said FIRS Press Release on Stamp Duties collections and remittances in Nigeria, pursuant to Section 163 of the 1999 Constitution of the Federal Republic of Nigeria, as amended, which provides that net proceeds of such collection should be returned to the States of DERIVATION after deduction of administration costs, as fixed by the Fiscal Responsibility Act, as amended, and the recent Senate resolution.
“See the Supreme Court decision in A.G, OGUN STATE & ORS. V. A.G, OF THE FEDERATION (2003) 2WRN 100 @ 147 – 149. Also, see the case of A.G. OF THE FEDERATION V. A.G. OF ABIA STATE & ORS (2002) 6 NWLR (Pt. 764) 542 @ 687.
In the case of UNION TRUSTEES LTD V A.G. OF THE FEDERATION & ANOR (1990) FHCLR 45 @ 51 – it was HELD that “it is, in fact, clear by the provisions of Section 163 of the 1999 Constitution of the Federal Republic of Nigeria, as amended, that “capital gains tax and stamp duties” are supposed to be paid, when applicable, to the States from which they are derived and NOT for the benefit, inter alia of all the States of the Federation, which would be the case, where the tax and duties are paid into the Federation Account.” See also Section 162 (3) of the 1999 Constitution of the Federal Republic of Nigeria, as amended.
“This being the case, it appears that the solution and the only way out in the circumstance, is for Deposit Money Banks and Financial Institutions to START forthwith, to REMIT stamp duties and EMTL collected from instruments initiated and executed or transactions initiated and carried out between persons or individuals pursuant to Section 4 (2) of the Stamp Duties Act, DIRECTLY to the States of the Federation in line with the Law and the arrears distributed according to derivation to each of the different States of Federation.”
Ubani also had maintained in a statement said the changes in the Finance Act, 2021 within relation to changes in the Stamp Duties Act were contradictory to the Constitution.
The statement was titled, “Finance Act, 2021, Changes to the Stamp Duties Act: Contradiction to the existing provisions of the Constitution.”
He said, “The Finance Act 2021, by virtue of Section 27, that makes changes to the provisions of Section 89A of the Stamp Duties Act, CAP S8 of LFN 2004. This amendment contradicts the extant provisions of Sections 162 and 163 of the Constitution of the Federal Republic of Nigeria, 1999, as amended.
“It is best to consider the provisions of Section 162 and 163 of the Nigerian Constitution, in order to fully understand the objective of this paper.
“Public revenue/distributable pool account: Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999 as amended, enjoins the Federation to maintain a special account to be called ‘Federation Account’ into which shall be paid All revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the Armed Forces of the Federation, the Nigerian Police Force, the Ministry or Department of government charges with the responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.
“Section 162 (10) (a) of the Nigerian Constitution provides thus: “For the purpose of subsection (1) of this section ‘revenue’ means any income or return accruing to or derived by the Government of the Federation from any source and includes – (a) any receipt, however, described, arising from the operation of any law…”. Thus, stamp duties could be said to constitute ‘revenue’ within the meaning of this section. However, Section 163 of the Constitution of the Federal Republic of Nigeria, 1999 as amended, provides thus: “Where under an Act of the National Assembly, tax or duty is imposed in respect of matters specified in item D of Part II of the Second Schedule to this Constitution, the net proceeds of such tax or duty shall be distributed among the states on the basis of derivation and accordingly_ (a) where such tax or duty is collected by the Government of a State or other authority of the State, (such as SIRS) the net proceeds shall be treated as part of the Consolidated Revenue Fund of the State; (In line with Section 4(2) of the Stamp Duties Act). (b) where such tax or duty is collected by the Government of the Federation, (such as FIRS) there shall be paid to each state, at such times as the National Assembly may prescribe, a sum equal to the proportion of the net proceeds of such tax or duty that are derived from the state,” (In line with Section 4(1) of the Stamp Duties Act).
“Paragraph 7(Item D), Part of the Second Schedule to the Constitution of the Federal Republic of Nigeria 1999, as amended, which is on Concurrent Legislative List provides thus: “In the exercise of its powers to impose any tax or duty on – (a) Capital gains incomes or profit of persons other than companies; and (b) documents or transactions by way of stamp duties.
The National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty or the administration of the law imposing it shall be carried out by the Government of a state or other authority of a state,” (Such as States International Revenue Service).”
He added, “Uwais, CJN (as he then was) in interpreting the above-cited provisions of the 1999 Constitution, in the case of Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation(2010) 2 N.T.I.R. 902 at 943 paragraph F 944 paragraph B) held: “It seems to me that the provisions of Section 162 Subsection (1)and (10) of the 1999 Constitution, are general in nature, while those Section of 163 (b)of the Constitution, which deal in particular with Capital Gains Tax and Stamp Duties are specific. Therefore the latter provisions override the former for ‘generlibuspsecialia derogant.’ (i.e. special things derigate from general things). There are the Capital Gains Act, Cap 42 of the Laws of the Federation of Nigeria, 1990, as amended, and Stamp Duties Act, Cap 411 which are ‘existing laws” under Section 315 of the 1999 Constitution. “However, the Acts do not contain provisions pursuant to Section 163 of the 1999 Constitution, and as at now the National Assembly has not prescribed how the new proceeds of such tax or duty are to be distributed among the States on the basis of derivation”.
Distribution of proceeds from stamp duties:
“In view od the Supreme Court decision in Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation (supra) the National Assembly has put the requisite legislation under Section 48(4) of the Finance Act, 2020. It, therefore, follows that there is no basis for the provisions, as currently provided under Section 27 of the Finance Act, 2021, and therefore should be removed and not allowed to subsist.
“(c) Collect, recover and pay to the designated account, any tax under any provision of this act, or any other enactment or law. (Including the stamp duties enactment/law).
“In the light of the foregoing, therefore, we are of the opinion that the Federal Government, through the FIRS, should return the sum equal to the proportion of the net proceeds of all the stamp duties that are derived and collected under Section 4 (1) of the Stamp Duties Act, to the respective “Stamp Duties Account” of the various States of the Federation in accordance with the provision of Section 163 (b) of the 1999 Constitution of the FRN, as the National Assembly has clearly prescribed in 48 (4) of the Finance Act, 2020, forthwith, as anything short of this would be inconsistent with the provisions of the Constitution of the Federal Republic of Nigeria.”