By Emmanuel Kehinde, Ilorin
A Professor of Taxation, Faculty of Law, Lagos State University, Professor Taofeeq Abdulrazaq and Managing Consultant/Chief Executive Officer, Maroct Consultants Group, Mr. Uzoma Francis Ubani, (FCTI) have described the current provision of Stamp Duties Act of the Finance Act 2021 as being contrary to the provision of the Constitution of the Federal Republic of Nigeria, 1999 as amended.
They spoke in separate interviews on Friday.
On 8 December, the National Assembly received the 2021 Finance Bill for consideration and eventual passage. As a build-on of the 2020 version, the bill seeks to amend multiple laws such as; the Capital Gains Act; Stamp Duties Act, Personal Income Tax Act; Companies Income Tax Act; Tertiary Education Trust Fund (Establishment Act) etc.
It was later passed into law.
Section 89(a) of the Stamp Duties Act was amended by substituting for Subsection (3), a new subsection “(3) “The Minister of Finance shall, subject to the approval of the National Assembly, make regulations for the imposition, administration, collection and remittance of the Levy, including regulations relating to the auditing, accounting, allocation and distribution if arrears of the relevant Stamp duties and Electronic Money Transfer Levies collected between 2015 and 2019 fiscal years, within 30 days of the date when this Act became effective.
Provided that Electronic Money Transfer Levies subsequently collected shall be distributed within 30 days following the month of collection.”
Abdulrazaq said, “The Stamp Duty provision there is definitely unconstitutional. The first reason is that it is a retroactive law because if collected or you were entitled to collect money from 2015 to 2019, it is the law in operation at that time that should operate. You can not in 2021 give somebody power from money that was due for collection in previous years to be collected under a new law. Money that does not even belong to the Federal Government.
Secondly, you can not even amend the mode of collection and division of stamp duty money. It is a constitutional provision under Section 163 of the 1999 Constitution as amended. So do anything about it, you need to amend the Constitution. Even the National Assembly can do it the way they are doing it. They need a Constitutional amendment for collection and division because the Constitution is very straightforward. It says stamp duty as it is collected must be returned to the state of derivation.
Thirdly, with the electronic money transfer, Section 4(2) says: It is the states that should collect. But currently, the Federal Inland Revenue Service is collecting, which is a breach of a provision of the FIRS Establishment Act.”
Ubani, who is a tax consultant, while saying the Stamp Duties Act is unconstitutional also disagreed with the powers conferred on the Minister of Finance by the current provision.
He said, “Electronic Money Transfer Levy Payment” is just a change of nomenclature from “Stamp Duty Payment.” But it is still under the Stamp Duties Act. It is a not stand-alone money transfers legislation.
“The operation section of the entire Stamp Duties Act is Section 4. Every other thing within the Stamp Duties Act revolves around the operational section, which is Section 4. That particular Section is divided into two; the powers given under Section 4 of the Stamp Duties Act, are divided into two: Under Section 4(1) “The Federal Government through the Federal Internal Revenue Service (FIRS)” shall collect instruments executed between the company and another company, or between company and individual or group of individuals, that is corporates.
“While Section 4 (2), “The State Governments through State’s Internal Revenue Service” (SIRS) of different States; I mean the “relevant tax authorities in the various States, shall collect instruments initiated and executed or transactions initiated and carried out between persons or individuals. Going by Section 48 of the Finance Act, 2020, which created Section 89A of the SDA, where the new electronic money transfer levy was introduced, and stamp duty, renamed into Electronic Money Transfer Levy, it is not a stand-alone section.
“The Section has to come under the operations of Section 4 of the Stamp Duties Act, which means that those electronic money transfer levy initiated and executed between company and another company or between company and individual or group of individuals, falls under Section 4(1) to be collected by the Federal Government, through the FIRS. While the instruments initiated and executed or transactions initiated and carried out between individuals fall under Section 4(2) which is to be collected by State Governments through the “relevant tax authorities” of various States. That is what the position of the Law is.
“This position of the Law is made good under Section 163 of the Constitution of the Federal Republic of Nigeria, 1999. The said Section 163 has A and B. The same way Section 4 of the Stamp Duties Act, has Section 4(1) and Section 4(2). Under Section 163 A, it is for the States. Once the States collects, it should be treated as Consolidated Revenue of that State; while under Section 163 (B), the net proceeds of the stamp duties collected by the Federal Government through the Federal Inland Revenue Service (FIRS), shall be returned to the States according to the proportion of derivation from each of the different States. That is the position of the Law.
“With this, as it stands, it is very clear that the National Assembly has now created a position and prescribed under Section 48(4) of the Finance Act, 2020 thus: “The States should have 85 percent of all the collections under Section 4(1) of the Stamp Duties Act, while the FG and FCT retain 15 percent. So in the eyes of the Law, there is nothing holding the FIRS from remitting to the various States, 85% of all the stamp duties collection or even directing the banks to remit 85% of the collections under Section 4(1) directly to the States and 15% to FIRS/FCT respectively.
“Under Section 4(2), the banks are to remit 100% of all collections directly to the various States. This is the only way, in my opinion, the collections could be made to be seamless and beneficial to all concerned.
“The ones already collected or the accumulated ones, the National Assembly having now made the law under Section 48(4) of the Finance Act, 2020, the FIRS needs to quickly return the net proceeds of the proportion of derivation which is derived from each of the different states of the Federation in accordance with the provisions of the Constitution. That is the position of the law.”
“Section 27 of the Finance Act, 2021, is in conflict with Section 3(3) of the Stamp Duties Act, in the sense that Section 3(3) of the Stamp Duties Act, mentioned specifically Federal and State Governments: “The functions under this Act shall be respectively confined to matters in respect of which the Government of the Federation and the Government of such States shall be competent to make laws.”
“What Section 27 of the Finance Act, is saying is that only one arm of the two Governments specifically mentioned in Section 3(3) of the Stamp Duties Act, which is the Minister, representing only the Federal Government, should now be conferred with power to make regulations that would be binding on both Federal Government and the State Governments in contravention and total disregard of the provisions of Section 3(3) of the Stamp Duties Act.
“The Minister alone cannot have such powers as conferred in Section 27 of the Finance Act, 2021, to make regulations that would be binding on the various States of Federation. So that particular section of the Finance Act, 2021, is in conflict with Section 3(3) of the Stamp Duties Act, as I have just explained and should be completely expunged.
“It is also in conflict with Section 111 of the Stamp Duties Act, which States: “All duties, penalties, and debts due to the Government of the Federation imposed by this Act shall be recoverable in a summary manner in the name of the Attorney-General of the Federation or of the States. This means that under Section 4(1), the AGF of the Federation shall carry out those recoveries. Whilst the recoveries under Section 4(2), the Attorney General of the States shall go after them.
“Again it is also in conflict with Section 115 of the same Stamp Duties Act. It provides: “In addition to the powers conferred on him by Section 15 and 105 of this Act, the President and the Governor of the States may make regulations relating to abc…. and so on. So we are contending that this power given to the Minister had already been given to the President and the Governor of a State to make regulations, so only the minister cannot make such regulations. We are saying it is in conflict of these particular Sections of the Stamp Duties Act.
“Section 116(2), the same Section 27 is in conflict with it as well. Section 116(2) states: “The House of Assembly of a State may by a resolution increase, diminish or reduce the duty chargeable under any of the heads specified in the Schedule in respect of the document regarding which the Government of a State is exclusively competent to make laws and in respect of any matter within such exclusive competence may add new duties or otherwise, add to vary or revoke the schedule.
“So our contention is that only the Minister cannot make such a regulation. In fact, the powers having been conferred to the President and the Governor of a State, the Minister has no power to make such regulations as currently conferred in Section 27 of the Finance Act, 2021, and therefore, should be entirely removed.
“Section 163 of the 1999 Constitution:” Where under an Act of the National Assembly, tax or duty is imposed in respect of any of the matters specified in item (D) of Part 2 of the Second Schedule to this Constitution, the net proceeds of such tax or duty shall be distributed among the States, on the basis of derivation and accordingly. (a) Where such a tax is collected by the government of a State or other authority of the State such as the State Internal Revenue Service, the net proceeds shall be treated as part of the Consolidated Revenue Fund of that State. (b) Where such a tax or duty is collected by the Government of the Federation or other authority of the Federation such as the FIRS, there shall be paid to each State at such time as the National Assembly may prescribe, a sum equal to the proportion of the net proceeds of such tax or duty that are derived from that particular State. So, in view of this, the National Assembly under Section 48(4) of Finance Act, 2020, has now made good of this particular section where it said the National Assembly may prescribe a sum equal to the proportion of the net proceed of such tax or duty.
“The National Assembly has now prescribed for such proceeds. This means that 15 percent should go to the Federal Government and the FCT while 85 percent is returned as net proceeds of such duty as derived from each State. So there is now no need for Section 27 of the Finance Act, 2021, the National Assembly having made good of the provisions of the 1999 Constitution under Section 163(b). There is absolutely no need for Section 27 of the Finance Act, 2021, and it should be urgently removed and not allowed to subsist. That is my opinion.”