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Collection and Remittance of Statutory Charges on Receipts to Nigeria Postal Service Under the Stamp Duties Act

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INTRODUCTION

The President has said it times and again that Nigeria is broke[1]. And why won’t we be broke? The price of crude oil per barrel (which is our primary source of income) keeps going down, naira keeps crashing; yet, we keep spending because we have to keep the Nigerian economy going. Well-meaning Nigerians have called for diversification of our economy and specifically, that we should find alternate sources of income in this country. In this vein, the Federal Government of Nigeria has started exploring revenue opportunities in the non-oil sectors especially by way of taxes and rates. In showing its seriousness in diversifying the Nigerian economy, the Federal Government, in its 2016 budget has a revenue projection of N3.86 trillion, out of which oil revenues will be N820 billion and non-oil revenues will be N1.45 trillion.

The CBN, as a major stakeholder in the regulation of Nigerian economy, has joined in the search for a way to save the country’s economy and has come up with a circular to all deposit banks (DMBs) and other financial institutions in Nigeria, titled “Collection and remittance of statutory charges on receipts to Nigeria postal service under the Stamp duties Act”. The Circular dated 15th Jan, 2016 was made available to the public on the 19th of Jan, 2016.

The news of the circular spread like wild fire in harmattan and Nigerians wasted no time in criticizing the CBN for imposing this ‘hardship’ on the poor masses. A lot of us have complained about the numerous deductions already attached to running our bank accounts, the COT, the monthly maintenance charges, the ATM withdrawal deductions, SMS notification deductions and for those of us that uses the e-services of these banks, we get charged certain sums of money for every transfer that we make. And when we thought it couldn’t get any worse, this circular was passed.

A CURSORY LOOK AT THE CIRCULAR

For clarity and ease of reference, we shall dissect the circular into 5 broad heads viz:

  1. The introduction
  2. The enabling paragraph (Paragraph 1)
  3. The Exemptions (Paragraph 2)
  4. Application (Paragraph 3)
  5. Creation of NIPOST Stamp duties account and remission (par 4&5)

Each of these heads are considered hereunder one after the other.

  1. The introduction

The CBN, in the introductory part of the circular said that banks and other financial institutions are enjoined to support Government’s revenue generation drive of boosting the federal government revenue base through non-oil sectors by complying with the provisions of the Stamp Duties Act, LFN 2004 as reinforced by the court judgment in Suit No FHC/L/CS/1710/2013.

  1. The enabling paragraph (Paragraph 1)

The circular provides that with immediate effect, all Deposit Banks (DMBs) and other financial institutions should commence the charging of N50 per eligible transaction for receipts given by any bank or other financial institution in acknowledgment of services rendered in respect of electronic transfer and teller deposits from N1000 and above. The charges is said to be in accordance with the provisions of the Stamp Duties Act and Federal Government Financial Regulations 2009.

Now, we are going to look into some issues flowing from above.

                                                              Enabling Law 

The circular is said to draw its power from the provisions of the Stamp duties Act, 2004 and Government Financial Regulations, 2009.

According to the Stamp duties Act, the expression “receipt” includes any note, memorandum, or writing whereby any money amounting to four naira or upwards, or any bill of exchange or promissory note for money amounting to four naira or upwards, is acknowledged or expressed to have been received or deposited or paid, or whereby any debt or demand, or any part of a debt or demand, of the amount of four naira or upwards, is acknowledged to have been settled, satisfied, or discharged, or which signifies or imports any such acknowledgement, and whether the same is or is not signed with the name of any person[2].

The Act further requires that every receipt, voucher, contract note, agreement among others given by any person in acknowledgement of goods purchased or services rendered should be denoted by an adhesive postage stamp[3].

According to the Act, where adhesive stamps can be used to denote the payment of duty, postage stamps may be utilised for that purpose[4].

Section 92 of the Act makes it a criminal offence punishable on conviction if any person gives a receipt liable to duty and not duly stamped or refuses to give a receipt duly stamped where a receipt will be liable to duty[5].

The totality of the above provisions of the Stamp duties Act, LFN 2004 forms the legal basis for the imposition.

Eligible transaction

The circular provides that the banks will be charging N50 per eligible transaction. The question then is which transactions are “eligible transactions”?

After a careful perusal of the circular, eligible transactions will seem to include all receipts given by a bank or financial institution in acknowledgment of services rendered in respect of teller deposits and electronic transfers for the value of N1,000 and above; provided that it does not fall within the 2 exceptions specifically stated in the circular[6].

The CBN has further clarified the fact that the N50 deduction is per transaction of N1, 000 and above not on every N1, 000.

  1. The Exemptions (Paragraph 2)

The circular expressly exempted payments, deposits or transfers by self to self whether inter or intra bank from the charges. This is to the effect that as long as you are paying into your account by yourself, you will not be charged the stamp duty of N50. This is irrespective of the type of account and bank that you use, in as much as it is a transaction by you in respect of your own account. This we believe will be made possible by the synchronization of accounts to account holders pursuant to the BVN.

The good news to savings account holders is that this new charges do not apply to them. The circular provides that withdrawals or transfers from savings accounts are exempted from the charges. Invariably, all other account holders in the form of current, fixed, domiciliary and other types of accounts are the ones to which this stamp duty applies.

  1. Application (Paragraph 3)

The amount to be charged is applicable only to the receiving accounts. That is, the N50 deduction will be made from the account of the recipient and not that of the sender. Consequently, if someone sends a thousand naira to you, what you get is nine hundred and fifty naira.

  1. Creation of NIPOST Stamp duties account and remission (Paragraph 4&5)

The circular mandates all deposit banks to open an account designated as NIPOST Stamp Duties Account into which all charges collected shall be paid. This is to ensure accountability of the deductions made as stamp duties. Similarly, to further guard against fraud and ensure accountability, the circular provides that the balances in such accounts shall be transferred monthly by the DMBs to CBN NIPOST Stamp Duty Collection Account No. 3000047517.

All other financial institutions are to remit their Stamp Duty collections to any DMB of their choice.

CONCLUSION

A lot of Nigerians consider this new imposition to be a new provision by the present administration. What is however unknown to most Nigerians is that this NIPOST stamp duty requirement has been in the offing for quite some time. For instance, the Act, from which the circular derives its validity has been in operation since 1939; and as far back as 2013, NIPOST has sought to invoke the Stamp duty Act to the effect that banks ensure collection of N50 stamp duties on every N1,000. This was however not followed to the letter probably because NIPOST cannot compel the banks to do its biddings; however, now that it is coming from the CBN, it is likely going to hold more water.

So we ask, why then are they just implementing this Law if it has been around since all these years? The answer is simple- Because we have never been so broke as to have to look at other non-oil sectors for revenue. The purpose of the circular is clearly depicted in its introductory paragraph. It is to support Government’s revenue generation drive of boosting the federal government revenue base through non-oil sectors.

Is there going to be a reversal when the economy stabilizes? We don’t think so. This is because this imposed duty is rooted in a valid law that should have been implemented long ago. It is bad enough that it took us this long to put this provision of the law into practice and it will be even worse if we can’t keep pace with a law that is as old as 1939. A lot of developed economy derives a bulk of their revenues from internally generated revenue spanning majorly from taxes and rates. We honestly feel that this is a step in the right direction in ensuring that our economy no longer relies absolutely on internationally generated revenue of crude oil and its products. Whether the money so generated from this imposed duty is going to be appropriated for the wellbeing of the nation or the enrichment of the few high and mighty people is another ball game entirely.

One notable issue about this imposed duty is its regressive nature as it is a fixed rate rather than a graduated or ad valorem rate. This will therefore impact small business and low income individuals significantly more than large corporations and rich people.

A couple of people have expressed their opinion as to the fact that the charges should have been an aggravated rate, that is, the higher the amount being transferred to you, the higher the amount you have to pay. This, however, is not the position. This is basically because, unlike most other stamp duties whose rates are based on the transaction, what is attracting stamp duty here is the ‘receipt’ and not the transaction or amount involved.

Let’s look at it this way, assuming that the price of a receipt paper in a store is N50 and you go into that store to buy 5billion worth of goods, you will get a receipt- at N50 naira and if another person comes into that store and buy a thousand worth of goods, he will also get a receipt- at N50. The receipt price is at a flat rate, irrespective of the amount involved.

Another issue is that since the circular is deriving its strength from the Stamp duties Act, 2004, the CBN should not have the power to pick and choose which provision of the law to adopt and follow. The CBN has based this imposition of duty on the provisions of the Stamp duties Act (which we already discussed under head no.2) one notable thing is that the Stamp duties Act which provides for imposition of stamp duty on receipt makes exemptions as to some receipts which will not be subject to stamp duty. Consequently, it has been argued that if the CBN can adopt the provision of the Act to impose duty, it should also put into cognizance the exceptions recognized under the law[7].

If we go by this line of argument, then  the following receipts will be exempted from stamp duties: receipts on salary or pension; instrument liable to stamp duty which is duly stamped; acknowledgment by any banker of the receipt of any bill of exchange or promissory note for the purpose of being presented for acceptance or payment; payment and deposits or self to self (whether inter- or intra-bank); money withdrawn from a savings bank account[8]; receipt given by the payee of a money order; receipt given for or upon the payment of any Government duties or taxes or of money to or for the use of the Government; the duplicate of any receipt required by Government to be given in duplicate, the original receipt being duly stamped; Receipt given by an officer of a public department of the Government of Nigeria or a State for money paid by way of  imprest or advance, or in adjustment of account, where he derives no personal benefit therefrom, or for the refund of out-of-pocket expenses due from Government; receipt given for drawback or bounty upon the exportation of any goods or merchandise; receipt given for the return of any duties of customs upon certificates of over-entry, or upon re-importation certificates; receipt given for the refund of any sums deposited with the Treasury under the provisions of the Minerals Act; receipt given for the return of any monies over-collected by Government; receipt given by a prisoner on discharge, for money placed on deposit in the Treasury, or otherwise retained, during the term of his imprisonment; receipt given by an accused person for money or other property taken from him on his arrest; receipt given for money given or subscribed to the Nigerian Red Cross Society[9].

Looking at the above, it could be seen that the CBN has derived its two exceptions to the NIPOST stamp duty from the array of exemptions listed above. The Director Corporate communication of CBN, Mallam Ibrahim Mu’azu, has, also on January 21st 2016 added to the exceptions under the circular to the effect that the N50 will not be collected on Payments of salaries and wages[10].

We urge the CBN to look at the possibility of incorporating the exemptions under the SDA as enumerated above, into the exceptions to the NIPOST Stamp Duties. This will go a long way in preventing double imposition of duties and consequently, make it easier on the general public.

 

We value your opinion and treasure your comments; kindly share your thoughts in the comments section.

[1] See The Sun Newspaper of October 31st 2015- “Nigeria is broke , Buhari declares”
[2] Section 89 (1) Stamp Duties Act, (SDA) LFN 2004
[3] Section 89 (2) Stamp Duties Act, (SDA) LFN 2004
[4] Section 5 (2) Stamp Duties Act, (SDA) LFN 2004
[5] Section 92 Stamp Duties Act, (SDA) LFN 2004
[6] payments, deposits or transfer by self to self whether inter or intra bank; and any form of withdrawals/transfers from saving accounts
[7] Section 90 Stamp Duties Act, LFN 2004; Schedule 1 of the Stamp Duties Act, LFN 2004 under the heading ‘Receipts’
[8] The exemptions in bold are for emphasis; they are the ones that CBN has adopted
[9] Schedule 1 of the Stamp Duties Act, LFN 2004 under the heading ‘Receipts’
[10] This is also one of the exemptions recognized under the SDA, LFN 2004
Central Bank of NigeriaInternal Revenue GenerationNigerian BanksNigerian Postal ServicesStamp Duties ActStatutory ChargesSTK CaféTaxes

LawPavilion • February 23, 2016


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Comments

  1. ije February 24, 2016 - 7:29 am Reply

    LawPavillion.. You’re exceptional! Thanks!

  2. Eyo Honesty February 24, 2016 - 11:55 am Reply

    The given provisions as stated above is fair enough “if and only if” they are strictly complied to, by the respective banking institutions who make these deductions.
    But on the contrary, I am a verifiable witness to the fact that most banks (especially my bank, GTB) do not comply to the clauses in the provision.

    For instance, I recently made a withdrawal from my Current Account using an ATM by the roadside, my bank, the GTB charged my a stamp duty fee.
    Similarly, I made a POS transaction, I was also charged. I made online payments, I was charged.

    I want to believe that since the transactions were done on a current account, hence the charges that accrued.
    However, I will still need clarification as to which account should be charged and on what method of transaction – online, POS, ATM terminals etc.

    Until I find answers to these questions, I would believe that most banks, especially GTB, which is my Bank, do not keep to the injunctions of the provisions.

  3. Prof. RACE Achara of ENBAR February 25, 2016 - 1:09 am Reply

    You seem to have proceeded on a premise of legal validity to much of the CBN circular even when your excerpts from the SDA seem to negate that premise. Where, for instance, did the CBN derive their N50.00K tax from? The law simply requires any adhesive stamp. And this could be in any denominated sum. When 2k stamps were available, those used to be the stamps of choice in receipts issued in the good ol’ days. But if NIPOST artificially makes lower denomination stamps unavailable, the stamp duty will effectively go up to the minimum denominated value available for sale. In other words, the Act expects the use of actual stamps on actual receipts, not some notional or arbitrary sum reflected otherwise than by an actual adhesive postage stamp. Special categories of stamp duties, of course, require impressed – not postage – stamps. Those ones are assessed ad valorem. You will see these sorts mostly on land instruments to be registered in various lands registries in the country…
    I was hoping for clarification on whether the law had been amended in support of the CBN position especially when we realise that imposition, as opposed to mere collection, of a tax in Nigeria is not only a legislative province [as opposed to an administrative or executive matter], it is exclusively a federal power. This last point has been slightly overlooked by the Supreme Court in Aberuagba but, in any case, is of little effect in this instance since the SDA is a federal legislation…
    Thanks all the same for raising the issue for discussion.

  4. Bankole Jacob Akinwumi, Esq. May 12, 2016 - 12:08 am Reply

    This is very enlightening and educative. Keep it up please. Kudos

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