The Fierce Battle Between NIPOST & FIRS Over “Stamp Duty”
Why “Stamp Duty” should be renamed “Government Witness Stamp"
“The law says that for you to get your mail from point A to B, you must affix N50 stamp on it; another law insists that any financial transaction above N1000 attracts N50 stamp duty. The question here is why is the same commodity (Stamp) regarded as cost in one instance, and tax in another? It is obvious that we are talking about Transportation and Authentication costs here”. – Ellis Akama-Igbo Jack
If the government had invested quality thinking in coming out with 2004 stamp duty amendment act, it would have realized that “ N50 stamp duty” is not tax, but a charge government requires for witnessing a legitimate transaction within the territory called Nigeria. Yes, stamp duty is law, but certainly not tax.
The law says that every transaction in excess of one thousand naira [N1000] attracts a fifty naira N50 stamp. What this means is that, if Mr A, buys an item worth say N1,300 from a seller, Mr B; a N50 stamp must be affixed on the receipt to show that legitimate transaction actually took place between Mr A and B; and government, through NIPOST stamp, witnessed and confirmed the transaction as being legitimate and valid.
It is abnormal then to call the affixed stamp on any transnational document, a tax. Even, from the point of view of Accounting, government incurred cost in producing N50 stamp. Although, this writer is not in position to know the actual cost of producing a N50 stamp, but because cost is involved, it cannot be referred to as tax. In accounting, tax is a compulsory rate levied by government.
For instance, Value Added Tax (VAT) 7.5%. We have income tax, company tax, capital gain tax etc. These categories of tax are specific percentage charge on known activities. In the case of N50 stamp duty, it comes at a cost to NIPOST/Government.
Hypothetically, if the cost producing a unit of N50 stamp is N30, it follows that government charges a token of N20 for witnessing a transaction; similar to the charge for transporting a mail (letter) from point A to B. Can FIRS tell Nigerians the real cost of producing a N50 stamp to government? If N50 stamp duty is considered to be tax, what is the specific tax element in N50 stamp, considering the cost of producing a unit of the stamp?
If the cost of production is known and factored, what will be the actual cost of N50 stamp to government? Who is in a better position to determine the cost of N50 stamp? If the cost is determined, what is the real value of N50 stamp? The fact remains that when a commodity (stamp) is involved in transaction, it cannot, in real sense of it, be regarded as a tax, but cost incurred by the (seller) as a result of Government witnessing the transaction.
The needless controversy between Nigerian Postal Service (NIPOST) and the Federal Inland Revenue Service (FIRS) over which agency should collect revenue generated from stamp duties should not have arisen if government was properly advised on the real meaning of Stamp Duty. Beyond serving as a means of generating revenue to government, the real reason behind stamp duty is for government to be sure that any transaction within Nigeria is legal and legitimate.
A careful analysis of this excerpt from Punch newspaper report of January 7, 2020, by financial expert, on the tussle between NIPOST and FIRS, over which agency should collect stamp duty, will surely lead to one main fact and that is the determination of FIRS to transform itself into a rent collector in addition to their core mandate of tax collection, just because banks transfer N50 stamp duty on transfers above N1000 to CBN.
So, what FIRS intends to do is to seat back and expect money in their account with apex bank, after which they will smile home with 4% for doing nothing. If this is not the case, why the contention by FIRS that it has the sole responsibility for the collection of all taxes and duties in the country, while in actual fact, stamp is a financial instrument in the custody of NIPOST?
Apart from the fight for space between NIPOST and FIRS is pecuniary interest and self preservation. This writer believes that because FIRS takes four percent of the proceeds of the taxes and duties it collects as the cost it incurs for collection, adding the stamp duty into its basket will surely increase what goes to the agency.
NIPOST is not relenting in its effort in making sure that what rightly belong to it should come its way and rightly so, it will not be bad if the four percent comes it way.
To this writer, the fact that the consolidated executive bill that was sent to national assembly by the ministry of finance that saw FIRS inserting the responsibility to collect stamp duty in the version of the bill that was passed by the house of Representative; shows that a lot of water passed under the bridge. The House of Representatives was probably lobbied by FIRS.
This statement by the minister of Communication and Digital Economy, Dr Isa Ali Ibrahim Pantami, serves as a question to FIRS on its claim that it is the only agency saddled with responsibility to collect tax duties in the country. “To me, stamp duty should be collected by NIPOST, the same way the Nigerian Customs Service collect customs duties”.
In taking the minister’s pointblank statement on customs further, we may ask; why is the FIRS not bothered about tax being collected by the Court by way of the fee paid to it for Deeds? The cost of authenticating deed of assignment, partnership etc, is paid to the court throughout Nigeria, and this payment is for adhesive seal which is the same as stamp.
If the court collects fee for deeds authentication, why is NIPOST being deprived from collecting stamp duty for witnessing agreement between buyers and a sellers? Is this a case of all animals being equal, but some, more equal than the others?
To permanently put the controversy to rest, government should amend the 2004 stamp duty act to change the name, Stamp Duty to Government Witness Stamp. By the amendment, Nigerians will be sure of what they are paying for.
If Nigerians can pay as much as N500 in the court to authenticate transnational documents, they will surely not find it difficult to pay N50 to legitimize transactions as required by law. The payment of N50 is for government to be aware that the transaction was not an illegal one, and nothing more.
On the issue of banks and electronic transfer of money; what really is electronic transfer of money? In the real sense of it, what we seem to mean by electronic transfer of money, is the instruction an account holder gives to his banker to debit his account to a specific amount, in favour of another account, in or outside the bank.
There is nothing like electronic transfer of money in the real sense of it. What we have is ICT enhanced real time inter/intra-bank reconciliation. Because of internet and communication technology (ICT), we now carry our mobile phone/computer with us. This has made bank reconciliation easy. We can now via our apps, match our own bank account reconciliation with that provided by our various bankers.
Basically, transfer of money from one account to another is not done electronically; rather, we can say that the channel of information and data management is now so advanced that an account holder can give verifiable instruction to his banker to transfer money from his account to another in real time.
Banks still go for normal inter-bank clearing and reconciliation. It will therefore be wrong to say that because court had ruled that the law did not envisage electronic transfers, the banks should not deduct N50 stamp duty for transfer above N1000, as being opine in some quarters.
To this writer, what government should do via the office of the attorney general and minister of justice, is to direct Central Bank of Nigeria (CBN) to instruct commercial banks in Nigeria, to henceforth, inform current and prospective account holders, in a verifiable manner that N50 stamp duty (Government Witness Stamp) shall be deducted on transfers above N1000, in deference to court ruling, at least, to suit the fantasy of those who think that electronic transfer of money exist.
Finally, it is in the best interest of government to put a stop to this carefully contrived controversy between NIPOST and FIRS on stamp duty collection, via the suggested amendment to the act establishing it.
This will go a long way in blocking the colossal leakage in that area, at the same time, frees up huge funds that will be used for developmental purposes.
The amendment will surely serve as the last straw that will break the back of powerful but corrupt and coordinated syndicate that has been feeding fat on stamp duty funds.
Emeka Oraetoka, Information Management Consultant and Researcher, wrote in from Garki-Abuja.
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