Chartered Institute of Taxation Member Petitions Justice Minister over Finance Bill

A member of the Taxation Standards and Practice Monitoring Committee of the Chartered Institute of Taxation of Nigeria, (CITN), Mr. Francis Ubani, has petitioned the Minister of Justice and Attorney General of the Federation, Abubakar Malamai, over some provisions of the Finance Bill 2022, saying such provisions were unconstitutional.

According to the petition, a copy of which was acknowledged by the Ministry of Justice, and made available to press, the amendment to the sharing formula for revenue from stamp duties/electronic money transfer levy (EMTL) as proposed by the provisions of Section 23 of the Finance Bill 2022, which seeks to amend Section 89A of the Stamp Duties Act, make some substitutions for subsection (4) were unconstitutional.

Ubani listed the new sub-section as follows: “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 distributed as follow:  (a) 15 per cent to the Federal Government and the Federal Capital Territory, Abuja; (b) 50 per cent to the State Governments; and (c) 35 per cent to the Local Governments.”

The taxation expert explained that these were clearly inconsistent with, and in violation of the provisions of Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as amended, and therefore are null, void and of no effect whatsoever.

He stressed this was so since the distribution of the Stamp Duties/Electronic Money Transfer Levy (EMTL) revenue was based on derivation, pursuant to the provisions of Section 163 of the Nigerian Constitution, and should not be shared through “the Federation Account” pursuant to Section 162 of the said Constitution, without proper Constitutional amendment.”

Ubani added: “It is in fact, very clear that the provisions of Section 163 of the Constitution under reference, that Capital Gains Tax and Stamp Duties are supposed to be paid, when applicable to the States from which they are derived and not for the benefit, inter alia, of ALL the States, which will be the case, were the tax and duties are to be paid into the Federation Account, pursuant to Section 162 subsection (3) of the Constitution).”

He explained that 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 duties/levies paid by individuals on qualified chargeable instruments initiated and executed or transactions initiated and carried out between persons or individuals in the various States of the Federation, under Section 4 (2) of the Stamp Duties Act, 2004, as amended.

Ubani added: “It therefore, follows that various states of the Federation are clearly 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 of Finance Act, 2020, to demand from Deposit Money Banks and Financial Institution’s remittance of stamp duties on qualified chargeable electronic transfers, teller deposits and other qualified dutiable instruments initiated and executed between persons or individuals, whose accounts are domiciled within the territory of each of the various States of the Federation.

“As currently constituted and administered, the Stamp Duties Act, did not permit the infringement by the Federal Government, through the FIRS, into area which, under the precise and well spelt out separation of taxing powers enshrined in Section 4 (1) and 4 (2) of the SDA, as amended, are within the exclusive preserve of the States.

“It is therefore, our contention that stamp duties collected by the Government of the Federation, through FIRS, under Section 4 (1) cannot be paid into the Federation Account as directed by the FIRS, in paragraph 7 of the Press Release on collection and remittances of stamp duties dated 20/7/2020, and the CBN’s circulars, as doing so would be inconsistent with, and in violation of the provisions of Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered.

“It is pertinent to point out that in the Finance Acts, 2019 and 2020, 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 transfers of N10, 000.00 and above made through any bank platform. Under the Finance Act, 2020, Electronic Stamp Duty was replaced with Electronic Money Transfer Levy, but there is nothing in the provisions of the Finance Act, 2020, that renders Section 4 (2) of the Stamp Duties Act, 2004, as amended, ineffective.

“The Finance Act, of 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 of the Finance Act, 2020, also did not render the provisions of Section 4 (2) of the said Stamp Duties Act, 2004, as amended, ineffective, any “Transfer Levy” paid by individuals on transfers between persons or individuals is still collectible by the relevant Tax Authorities in the various States of the Federation.”

Furthermore, he stated: “The National Assembly has put the requisite legislation for distribution of proceeds from Stamp Duties/EMTL among the various States of the Federation on the basis of derivation under Section 48 (4) of the Finance Act, 2020.

“Therefore, how the net proceeds of such tax or duty are to be distributed among the different States of the Federation is now provided under Section 48 (4) of the Finance Act, 2020. It, therefore, follows that there is no basis for the provisions, as currently provided under Section 27 of the Finance Act, 2021, and Section 23 of the Finance Bill, 2022, and should therefore be voided and not allowed to subsist.

“From the provisions of the Stamp Duties Act, 2004, as amended, particularly Sections 4 (1) of the Stamp Duties Act, as amended by Section 53 (a) of the Finance Act, 2019, empower 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 a company and an individual, group or body of individuals i.e. corporate bodies.

“While, Sections 4 (2) of the said Act, as amended by Section 53 (b) of the Finance Act, 2019, empower the State Governments through their respective State Tax Authorities, to impose and collect duties on instruments initiated and executed or transactions initiated and carried out between persons or individuals whether electronically done or otherwise by Bank Tellers or other documents within the territory of each state.

“It is pertinent to point out that Sections 4 (1) and 4 (2) of the Stamp Duties Act, 2004, as amended, clearly provided for what is to be collected between the Federal Government and State Governments.

“Therefore, it is only the stamp duties and electronic money transfer levy (EMTL) that is collected by the Federal Government through FIRS, pursuant to Section 4 (1) of the said Stamp Duties Act, that should be distributed according to derivation, pursuant to Section 163 (b) of the Constitution, while the different States of the Federation should collect stamp duties and EMTL, pursuant to Section 4 (2) of the Stamp Duties Act, and Section 163 (a) of the Constitution, which currently, the Deposit Money Banks (DMBs) and Financial Institutions have not been complying with, based on the purported Federal Inland Revenue Service (FIRS) Press Release captioned “Clarification of Administration of Stamp Duties in Nigeria” and Central Bank of Nigeria (CBN) Circulars referenced CBN/GEN/DMB/02/006, dated 15/1/2016, and PSM/DIR/CON/CWO/07/066, dated 8/5/2020, that are not laws and have no binding effect whatsoever.”