November 17, 2020
Until recently, stamp duties had been one of the underutilized sources of revenue for the Nigerian Government. The Stamp Duties Act (SDA) was enacted in 1939 to provide statutory basis for the imposition of duties on executed dutiable instruments but its application to dutiable instruments in Nigeria was largely downplayed or even ignored by both the duty payers and the collection agencies. The wide spectrum of dutiable instruments outlined in the SDA including agreements, contracts, bank deposits, bills of sale, bonds, certificates, deeds, legal mortgages, etc., and the immense volume of transactions requiring the execution of such dutiable instruments, would have made stamp duties one of the main sources of revenue for the government.
However, the fact that the SDA was neither reviewed nor updated for several decades made it almost outdated and out of touch with current realities. This may have led to the low level of enthusiasm of the tax authorities to enforce collection and the overall non-compliance with the provisions of the SDA. It is therefore not surprising that various dutiable instruments executed from transactions carried out over the years were not duly stamped. The fact that many economies around the world are moving away from stamp duties to more efficient taxes may also be a contributory factor.
The amendments introduced by the Finance Act 2019, which are geared towards expanding the scope of dutiable instruments in the SDA to cover electronic/ digital forms, are a wake-up call that there is a renewed focus on SDA. Based on the amendments, “Receipts” now include electronic inscriptions that acknowledge money received and settlement of debt, while “Stamps” can now be in the form of electronic stamps or electronic acknowledgement. Also, there is now a Stamp Duty charge on bank deposits or transfers of ₦10,000 or more.
This article seeks to examine the question of who bears the responsibility for any liability and the possible impact of the amendments introduced by the Finance Act, in the light of the palpable apathy of both the populace and the relevant authorities over the years.
Generally, stamp duties are payable upon the execution of dutiable instruments that are contained in the Schedule to the Stamp Duties Act which also provides for the applicable Stamp Duty rates per dutiable instrument. The rates provided are fixed or ad valorem (according to value). For example, assignments by way of primary security attracts Stamp Duty at an ad valorem rate of 0.00375% (75 kobo for every ₦200) while appointment of a new Trustee and a letter or power of attorney for receipt of one payment of dividend attracts stamp duties at a fixed rate of ₦1.50. However, in some cases such as dividend warrants, the SDA provides for both ad valorem and fixed rates.
The amendment to the SDA by the Finance Act not only widened the scope of dutiable instruments, it also brought to the spotlight, the reportable revenue that the government may have lost over the years. Thus, there has been renewed vigor from the government towards stamp duties collection and back-duty assessment. This brought about the commissioning of an Inter-Ministerial Committee on Audit and Recovery of Back-Years Stamp Duties (‘the Committee’). The Committee was inaugurated with the aim of recovering Stamp Duties and accompanying fines and penalties for the relevant five-year period, in line with Sections 110, 112 and 114 of the SDA. Since then, the FIRS has also reported significant increase in the Stamp Duty revenue collected. In 2019 fiscal year, the FIRS generated about ₦18 Billion from stamp duties while in the first half of 2020 alone, the FIRS has collected over ₦67 Billion as stamp duties.