*FG through FIRS is only an agent to states on collection of stamp duties – Ubani
Success Nwogu
Managing Consultant/Chief Executive Officer, Maroct Consultants Group, Chief Ubani Uzoma Francis (FCTI), has called on the 36 states in Nigeria to stand up and collectively demand for the Stamp Duties’ revenues without fear or favour, adding that it is their constitutional right to do so.
He opined that all the stamp duties’ revenues belong to the different states of the Nigerian federation.
He said the Federal Government of Nigeria(FGN) through the Federal Inland Revenue Service, (FIRS) is only an agent to states on collection of stamp duties.
Nigeria comprises 36 states and the Federal Capital Territory
Ubani spoke in Abuja while delivering a paper on ‘Stamp duties: Practical approach on fostering united front on issues bothering on the collective interest of the States,’ during a meeting of the Nigerian Governors Forum on Tuesday, March 15, 2022.
According to him, the different states of the federation should take note that, in respect of the collection of stamp duties/levies revenue in Nigeria, the states are the principals; while the Federal Government (FG) through the FIRS is only “constitutionally designated collection agent.”
He said consequently, the FG/FIRS is accordingly mandated by the provisions of Section 163 (b) of the Constitution of the Federal Republic of Nigeria, 1999, as amended, which, according to him, means that FG/FIRS is obliged to follow the strict dictates and spirit of the said constitutional provisions.
He said the alleged orchestrated deception, unfair, and unwholesome collection practices should stop, particularly in the payment of the net proceeds of the duties/levies collected, to the different States of the federation in compliance with the constitution which is the supreme law of Nigeria.
Below is Ubani’s paper:
FEDERAL GOVERNMENT THROUGH THE FIRS IS ONLY AN AGENT TO STATES ON COLLECTION OF STAMP DUTIES”
STAMP DUTIES: PRACTICAL APPROACH
PRESENTATION ON AUTHORITY OF STATES TO COLLECT STAMP DUTIES
Pursuant to Section 4 (2) of the Stamp Duties Act, Cap S8, LFN 2004, As Amended by Section 53 (b) of The Finance Act, 2019. At NGF 2-day meeting on fostering united front on issues bothering on the collective interest of the States, March 14 & 15, 2022.
CLEARLY DEFINED SEPARATION OF COLLECTION POWERS
The Nigeria’s operative constitution, the 1999 Constitution of the Federal Republic of Nigeria, as amended, made provision for different levels of authorities, responsibilities and powers for each level of Government and how to finance the carrying out of its responsibilities for assigned activities. There are various statutory legislations in place to enable the various tiers of Government carry out their respective duties. One of such legislation is the Stamp Duties Act, CAP S8, LFN, 2004, as amended, which makes provisions for the imposition and collection of revenue from stamp duties in respect of instruments made between companies, on one hand, and individuals, on the other.
Section 4 (1) of the Stamp Duties Act, 2004, as amended by Section 53 (a) of the Finance Act, 2019, empowers the Federal Government of Nigeria, through the Federal Inland Revenue Service (FIRS), to collect duties derivable from instruments initiated and executed or transactions initiated and carried out between two companies, and between a company and an individual, group or body of individuals i.e. corporate bodies.
While Section 4 (2) of the Stamp Duties Act, as amended by Section 53 (b) of the Finance Act, 2019, empowers the relevant tax authorities in different States of the Federation, to impose and collect duties on instruments initiated and executed and/or transactions initiated and carried out between persons or individuals, whether electronically done or otherwise by Bank Tellers or other documents within each of the different States territories.
Section 4 (1) and (2) of the Stamp Duties Act, 2004, as amended, clearly states what is collectible between the Federal Government of Nigeria, on one hand, and the different States of the Federation, on the other. The different States of the Federation are obviously entitled, pursuant to Section 4 (2) of the Stamp Duties Act, CAP S8, LFN, 2004, as amended by Section 53 (b) of the Finance Act, 2019, and Section 89, as amended by Section 54, of the Finance Act, 2019, as well as the new Section 89A, which was introduced by the Finance Act, 2020, to collect stamp duties on qualified chargeable electronic transfers, teller deposits and other qualified dutiable instruments initiated and executed between persons or individuals, within the territories of the different States of the Federation.
In the Finance Act, 2019, the definition of stamp, instrument and receipt was enhanced to include electronic transactions and receipts and specifically imposed a charge of N50.00 on electronic transfer of N10, 000.00 and above made through any bank platform. The Finance Act, 2020 further amended the Stamp Duties Act, 2004, by the introduction of a new Section 89A, which introduced an Electronic Money Transfer Levy on electronic receipts or transfers in banks or financial institutions. It did not abrogate the original Section 89, which is still effective and subsisting. The new Section 89A introduced by the Finance Act, 2020, also did not render the provisions of Section 4 (2) of the Stamp Duties Act, 2004, as amended, ineffective, because any “Transfer Levy” paid by individuals on transfers between persons or individuals, is still collectible by the relevant Tax Authorities in the different States of the Federation.
Section 4 (2) of the Stamp Duties Act, 2004, as amended, still remains for the exclusive collection of the relevant Tax Authorities in the different States of the Federation. The change of nomenclature from Duty to Levy does not in any way remove the powers of the relevant Tax Authorities in the States of the Federation, to charge and administer Duty and/or Levy paid by individuals on qualified chargeable instruments, initiated and executed and/or transactions initiated and carried out between persons or individuals in their various States under the Stamp Duties Act, 2004, as amended.
It is very clear that the relevant Tax Authorities in the different States of the Federation, are to collect stamp duties and/or transfer Levies emanating from qualified chargeable instruments initiated and executed or transactions initiated and carried out between persons or individuals pursuant to Section 4 (2) of the Stamp Duties Act, as amended by Finance Acts, 2019 and 2020 respectively.
The distortion of facts, misinterpretation, misunderstanding, and/or outright ignorance of the provisions of the Stamp Duties Act, in some quarters, is undoubtedly targeted at undermining the very clear separation of powers provided in Section 4 (1) and 4 (2) of the Stamp Duties Act, 2004, as amended by Section 53 (a) and 53 (b) of the Finance Act, 2019 respectively. The legislative scheme in Stamp Duties Act, was validly-enacted by the National Assembly, and reflected a clear policy-based choice, that favored individual States’ autonomy and control over one’s revenue, under Section 4 (2) of the Stamp Duties Act, 2004, as amended. The different States of the Federation should not allow the current cunningly usurpation of the powers vested on the various States to collect stamp duties as the position of the Stamp Duties Act, 2004, as amended, is very clearly stated and should honestly be interpreted accordingly in favor of the different States of the Federation.
UNNECESSARY CONTROVERSY OF IMPLEMENTATION
There is 1ST CBN circular with Ref: CBN/GEN/DMB/02/006 dated 15/1/2016, 2ND CBN circular with Ref: PSM/DIR/CON/CWO/07/066, dated 8/5/2020, and 3RD CBN circular with Ref: PSM/DIR/CON/CWO/08/022, dated 5/6/2020, that initially directed all Deposit Money Banks (DMB’s) to remit ALL Stamp Duties collected to CBN NIPOST STAMP DUTY COLLECTION ACCOUNT, and then subsequently directed all Deposit Money Banks (DMBs) to remit ALL Stamp Duties collected to FIRS Stamp Duty TSA Account 3000103686 domiciled with Central Bank of Nigeria.
There is also FIRS Press Release captioned: “Clarification of Administration of Stamp Duties in Nigeria”, dated 20/7/2020, that states in paragraphs 5 (iii) and (iv) thereof, that the FIRS is vested with powers to collect stamp duties on all banking transactions, as the powers given to the State Governments through their respective “Revenue Authorities” to administer stamp duties by ensuring the assessment, collection and accounting for stamp duties between individuals into the State Governments revenue accounts, does not include banking transactions. Also, the proviso to paragraph 7 of the said FIRS Press Release on Remittances of Stamp Duties, states thus: “… Please note that stamp duties chargeable on all electronic transfers of money (including those initiated by an individual and received by another individual) through any Money Deposit Bank in Nigeria, shall be remitted into the FIRS Stamp Duty Account only. This account is a Federation Account; the revenue accruing therein is distributed monthly to the three tiers of government in Nigeria (i.e. Federal, State and Local Governments) at the Federation Account Allocation Committee (FAAC) meeting”.
It is our position that both the “CBN said Circulars” and “FIRS said Press Release” can only be read and applied in conformity with the Stamp Duties Act, 2004, as amended, otherwise, it will be null, void and of no effect whatsoever. This our position is because the said “CBN Circulars” and “FIRS said Press Release” cannot be elevated to being capable of removing some provisions from the Stamp Duties Act, 2004, as amended, and the Constitution of the Federal Republic of Nigeria 1999, as altered. It is very unfortunate that the “CBN circulars” and the “FIRS Press Release” directed this obvious distortion and misrepresentation of the laws and facts, undermining the very clear separation of powers enshrined in Section 4 (1) and 4 (2) of the Stamp Duties Act, 2004, as amended by Section 53 (a) and 53 (b) of the Finance Act, 2019 respectively, as well as Section 163 (a) and (b) of the said Constitution.
We still confidently maintain that it is the right of the “Relevant Tax Authority” in a State, to collect stamp duties/levies on transactions initiated and carried out through the banking platform, between persons or individuals, while the power vested in FIRS by the said Stamp Duties Act, is on transactions initiated and carried out through the banking platform, between two companies, or between a company and an individual, group or body of individuals ONLY.
The said CBN circulars and FIRS said press release is inconsistent with the provisions of the Stamp Duties Act, and Constitution, therefore, not correct, as wrongly stated in the said FIRS Press Release, that such power given to the different State Governments, through their respective “Revenue Authorities”, to administer stamp duties by ensuring the assessment, collection and accounting for stamp duties between persons or individuals into the different State Governments’ Revenue Accounts, does not include qualified chargeable instruments initiated and executed or transactions initiated and carried out through the banking platform.
It is very clear that from the above proviso to paragraph 7, the said FIRS Press Release recognized that electronic transfer of money initiated by an individual and received by another individual is not a banking transaction to which any bank is a party. Therefore, the various arguments in some quarters, favoring banks being a party to all transactions carried out through its platform is contradictory, baseless, suspiciously intended to deceive and deviously usurp the powers of the “Relevant Tax Authorities” in different States of the Federation, as it is obviously not the accurate and consistent position of the law, even when it is clearly and conspicuously written in the said FIRS Press Release mentioned above.
However, not minding the very obvious, glaringly stated and incontrovertible fact, that every transaction initiated and carried out by PERSONS or INDIVIDUALS are meant for the “Relevant Tax Authority in a State”, in line with the provisions of Section 4 (2) of the Stamp Duties Act, 2004, as amended by Section 53 (b) of the Finance Act, 2019, yet the various DMB’s went ahead, with impunity, to treacherously usurp the powers conferred on the States’ “Relevant Tax Authorities” deliberately, in total defiance with the provisions of the law and to the detriment of the “Relevant Tax Authority” in different States of the Federation.
The fact that the said FIRS Press Release clearly stated that the account to which Deposit Money Banks in Nigeria should be remitting the stamp duties into; is the said FIRS account, that is a Federation account, which according to the said Press Release, the revenue accruing therein is distributed monthly to the three tiers of governments in Nigeria through FAAC meetings, is unfounded and unconstitutional.
The foregoing is a blatant misinformation, suspiciously intended at deceiving the general public and a clear violation of the provisions of the Constitution of the Federal Republic of Nigeria, 1999, as altered, because “Federation Account” is a creation of Section 162 of the said Constitution, which is a revenue account to be distributed under Section 162 of the said Constitution and does NOT in any way include STAMP DUTIES.
Therefore, the said proviso to paragraph 7 of the said FIRS Press Release, is contradictory and totally inconsistent with the provisions of Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered. The said FIRS Press Release are neither laws, nor regulations, but are merely for information of general public and in particular all taxpayers’ representatives or advisers and the staff of Revenue Service. They contain what the makers consider to be their interpretation of the various Nigeria Tax Acts, particularly Section 4 of the Stamp Duties Act, 2004, as amended, and thus constitute only the opinion of the makers on a point of law with no legally binding effect.
CONSTITUTIONAL PROVISIONS
Let us look at sections 162 and 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered:
Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, 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:
“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)
What the Constitution is saying here-above is: Hey; the tax or duty the Government of a State or the State’s IRS collects here, belongs to that State in its entirety to KEEP, but that the net proceeds shall be treated as part of the Consolidated Revenue Fund of the State.
(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)
The intendment of the Constitution here-above is: Look-here, the tax or duty the Government of the Federation or the FIRS collects here, does NOT in any way belong to the Federal Government, that you; the FG/FIRS is “ONLY an AGENT of COLLECTION” to the different States of DERIVATION, and thereafter, there SHALL be paid to each State, a sum equal to the proportion of the net proceeds of such tax or duty that are collected/derived from the State. That you; the FG/FIRS is ONLY entitled to AGENCY-COMMISSION, which is to deduct the cost of collection and/or administration cost, that is ALL. That You CANNOT Keep the TAX or DUTY so COLLECTED.
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).
Section 1 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, 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.
COURT DECISION AND PRONOUNCEMENT
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 at now the National Assembly has not prescribed how the net proceeds of such tax or duty are to be paid among the States on the basis of derivation”.
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 payment 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 paid among the different States of the Federation is now provided under Section 48 (4) of the Finance Act, 2020, which provide thus:
48 (4) Notwithstanding any formula that may be prescribed by any other law, the revenue accruing by virtue of the operation of this section, shall, on the basis of DERIVATION, be paid as follows:
(a) 15% to the Federal Government and the Federal Capital Territory, Abuja; and
(b) 85% to the State Governments.
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 expunged in its entirety.
No Country can survive without the “Rule of Law”, it is not just possible. It is our ability to subsume ourselves to the operation of rule of law, that makes us different from animals, that removes us from that form of nature where life was short, nasty and brutish. By the year 1885, Professor A. V. Dicey, had already discussed the concept of the rule of law, which in summary, is subjection of all persons before the law, and equality before the law. Whether you be a Sovereign, President, Head of State or the poorest and wretched of the earth.
Prof. A.V. Dicey’s rule of law, (The Constitution) means the absolute supremacy or predominance of the regular law, as opposed to the influence of arbitrary power, and excludes the existence of arbitrariness, or even of wide discretionary authority on the part of the government. Prof. Dicey regarded rule of law, as the bedrock of the British Legal System, to which Nigeria adopted: ‘this doctrine is accepted in the Constitutions of U.S.A. and India, as well’. NO ONE IS ABOVE THE LAW!
CONCLUSION
Knowing your strong ground and holding on to it, irrespective of the threat:
What we have done in this matter of STAMP DUTIES, is that we extensively researched the provisions of the Stamp Duties Act, and the constitutional provisions, as it concerns the Stamp Duties Act, and our research revealed a very solid and strong ground, in favour of the different States of the Federation.
We decided to hold on to that strong and firm ground discovered in the provisions of the 1999 Constitution of the Federal Republic of Nigeria, as altered, not deterred by the overwhelming threat coming from different quarters, in form of Letters and/or Circulars on stamp duties from CBN, Press Release on stamp duties from FIRS, Newspaper Publications on stamp duties from NIPOST, and Letters on stamp duties from the office of the Attorney General of the Federation.
It was Mahatma Gandhi who said, and I quote: “Many people, especially ignorant people, want to punish you for speaking the truth, for being correct, for being you. Never apologize for being correct, or for being years ahead of your time. If you are right and you know it, speak your mind. Even if you are a minority of one, the truth is still the truth”. End of quote.
Consequently, it is our fervent believe that the TRUTH shall prevail at the END.
We, therefore, enjoin you, the different States of the Federation, to form a united front and demand for the stamp duties revenue that rightly belong to you by the very clear provisions of the Constitution of the Federal Republic of Nigeria, 1999, as altered.
Having NOW known your strong ground on stamp duties revenue, we urge you to be united and firmly HOLD ON TO IT.
RECOMMENDATIONS
Stamp Duties Revenue streams is a highly technical area of taxation that is very much misunderstood and very highly misinterpreted by many,
State Governments should be very careful in engaging technical support/advisers in the area of Stamp Duties Revenue Head, as many that profess, they know, are all misunderstanding and misinterpreting the provisions of the Stamp Duties Act and the provisions of the Constitution of Federal Republic of Nigeria, 1999, as altered, as it concerns stamp duties.
The different State Governments are strongly advised and enjoined, as a matter of urgency, to seriously overhaul, review and domesticate Stamp Duties and Capital Gains Laws, in their various States, for effective and optimal collection of stamp duties and capital gains tax revenue in their different States.
For quick and immediate wins: Section 115 of the Stamp Duties Act, empowers the Governor of a State to make Regulations to the further and better carrying into effect of the objects and purposes of this Act, among others.
There is urgent need to provide technical training and capacity development for Tax Administrators and key staff of the States Internal Revenue Service for efficient service delivery and to avoid misinterpretation and arbitrariness.
FINAL PARTING WORDS
In summary, the different STATES of the Federation should TAKE NOTE that, in respect of the collection of stamp duties/levies revenue in Nigeria, the STATES are the PRINCIPALS; while the FG through the FIRS, is only “Constitutionally designated collection AGENT”. Therefore, the FG/FIRS is accordingly mandated by the provisions of Section 163 (b) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, which means that FG/FIRS is obliged to follow the strict dictates and spirit of the said Constitutional Provisions. The orchestrated deception, unfair, and unwholesome collection practices should STOP, particularly in the payment of the net proceeds of the duties/levies collected, to the different States of the Federation in compliance with the CONSTITUTION which is the supreme LAW of Nigeria.
ALL the stamp duties revenue, undeniably belongs to the different states of the Federation. I urge the various States, to therefore, Stand Up and Collectively Demand For the STAMP DUTIES REVENUE without fear or favour; it is your Constitutional Right to do so…. Continue reading