The Federal Inland Revenue Service (FIRS), on Tuesday 30 June 2020, launched its adhesive stamps for the purposes of stamp duties. An inauguration themed ‘Stamp Duties Act: Repositioning Nigeria Towards Greater Revenue Mobilization’ inducted an inter-ministerial committee to oversee the audit and recovery of back years’ stamp duties.
It will be recalled that the Finance Act amended Section 4(2) of Stamp Duties Act, Cap S8 LFN 2004 (SDA) and named the bona fide collection authorities to be FIRS on behalf of the Federal Government, and the State Internal Revenue Services, on behalf of the State Governments.
The resuscitation of the collection of stamp duties demonstrated by the launch of FIRS-customized stamps puts to rest erstwhile reservations expressed about the authority of the FIRS in respect of stamp duties. In addition, in line with the provision of Section 111 of SDA, which gives the Attorney General of the Federation (AGF) the power to recover unpaid stamp duties, the FIRS is collaborating with the AGF to embark on a five-year back duty investigation for outstanding and unpaid stamp duty. It is however unclear whether the exercise will be limited to recovery from collection agents like banks, the Corporate Affairs Commission (CAC), MDAs, etc or whether individual companies will also be covered.
Stamp duties were previously chargeable on dutiable instruments limited to written documents only. However, the amendment by the Finance Act now extends the application of stamp duties to electronic documents and receipts. While the conscious implementation of the SDA is a welcome development, this does not come without its challenges, some of which are:
a. Obsolete provisions in respect of rates, penalties etc., considering that the SDA merely evolved from the Ordinance 41 of 1939.
b. Uncertainty as to which party is responsible for stamping and payment of duties.
c. Different rates in the SDA compared to the rates put forward by the Joint Tax Board (JTB) and FIRS, causing ambiguities.
d. Absence of provision in the SDA regarding possible refund for remittance to the wrong authority.
We expect FIRS to consider some of the following recommendations before and in the course of carrying out the back duty exercise for stamp duty:
a. Consider a re-enactment of the law by removing archaic provisions and including clear and up-to-date terms such as the applicable rate, penalties payable etc.
b. Sensitization of taxpayers on the workings of stamp duties given that the SDA has been largely overlooked in the past.
c. Consider granting amnesty to taxpayers in respect of duties payable on instruments relating to past transactions, especially in light of the current economic downturn posed by the Covid-19 pandemic.
d. Harmonize rates of duties payable for instruments relating to different transactions.
Finally, we have no doubt that the SDA offers an avenue for revenue generation for the government. However, to effectively achieve this, we believe that the taxpayers need to be adequately informed of the nuances thereof and that FIRS should consider other recommendations mentioned above, in order to garner the cooperation of the public.