Written by DELOITTE
ONE of the key drivers for the reforms that are being pursued in the tax space in Nigeria is “non-review of tax legislation, which had led to obsolete laws that do not reflect Nigeria’s current realities”. Given that laws are potential instruments for social change and/or transformation, the imperative to make the tax legislation relevant to the needs of the Nigerian economy, its managers and other stakeholders such as individual and corporate taxpayers cannot be denied.
ONE of the key drivers for the reforms that are being pursued in the tax space in Nigeria is “non-review of tax legislation, which had led to obsolete laws that do not reflect Nigeria’s current realities”. Given that laws are potential instruments for social change and/or transformation, the imperative to make the tax legislation relevant to the needs of the Nigerian economy, its managers and other stakeholders such as individual and corporate taxpayers cannot be denied.
The Stamp Duties Act Cap S8, Laws of the Federation of Nigeria 2007 (SDA) is one of the oldest legislation (based on year of enactment) imposing a form of tax in Nigeria and has attracted minimal significant review till date even though the Joint Tax Board (JTB) had tried to paper over the gaps in the framework in the intervening period.
SDA provides the legal basis for the imposition, application and administration of Stamp Duties in Nigeria. The schedule to the Act provides a list of dutiable documents and rate of tax to be imposed by Government. Duties are charged either as fixed or ad valorem rates on instruments and written documents. Instruments subject to stamp duties include; agreements, appraisement, instrument of apprenticeship, bills of exchange and promissory notes, bills of lading, conveyances on sale, leases, powers of attorney, marketable security, mortgages, policies of insurance, receipts, settlements etc.
Payment of stamp duties in respect of chargeable/dutiable instruments ensures that the instruments can be enforced and admissible in evidence in Nigerian courts. Failure to obtain appropriate stamping of dutiable instruments may render them unenforceable by a party seeking judicial relief on account of a breach by a counter-party.
There are concerns with four primary areas of the SDA. These are:
$1• •Scope: The SDA at its current state is designed to impose duties on written documents, unlike other tax laws which are designed to tax business profits, gains from disposal of assets and transactions. While the scope of the SDA is very wide, seeking to capture an array of instruments, it is highly ineffective due to its unspecified scope.
$1• •Structure: The concern is that the provisions of the SDA appear obtuse. Taxpayers should easily understand what the obligations are under the SDA and should be able to ascertain the amount to be paid as duties. This is against the expectation that a good tax system should be simple and certain. The SDA, in its current state, does not reflect these attributes.
$1• •Administration: There is concern that the approach to the administration of the provisions of the SDA is unwieldy. It is crucial that the form of administering the Act is strategically detailed.
$1• •Rates: The description of the applicable rates in the SDA underscores its obsolescence both in functionality and application. Thus, there is the need to review the rates if the potential for revenue vide stamp duties would ever be realised.
To the extent that the SDA can be leveraged to deliver potential additional revenue per annum in the sum of N50b, there is obvious reluctance to repeal the SDA.
S.4 (1) and (2) of SDA empowers the Federal and State Governments to impose, charge, and collect stamp duties. The administration of stamp duties is therefore carried out through the Federal Inland Revenue Service (FIRS) and various States Internal Revenue Service (SBIR). FIRS collects duties imposed on documents relating to matters involving a company while the various SBIR has the authority to collect stamp duty in respect of documents executed between individuals.
FIRS is at the vanguard of an exercise geared towards revamping the framework for the application of stamp duties in Nigeria. In re-enacting the SDA to meet the expectations and realities of the Nigerian economy for the 21st century therefore, the following should be considered:
$1• •the necessity for fiscal federalism: The exercise by FIRS should be holistic and ensure that the interest of States of the Federation are taken into consideration as a demonstration of the significance of fiscal federalism. The Nigerian Constitution that provides the basis for the allocation or otherwise distribution of taxing powers in the Federation is a Federal Constitution and not a unitary one. In this spirit, the relevant principles that will underpin the revamped framework should be jointly set such that the National Assembly can enact same in a new stamp Duties legislation for the Federation whilst each House of Assembly enact the applicable stamp duties law in the States respectively.
$1• •utility of interventions previously made by the JTB to paper the cracks and any initiatives that is deemed relevant e.g. a significant example is the exemption of share transfers from stamp duty which JTB has pushed but which has been ignored in practice.
$1• •the impact on the overall cost of doing business in Nigeria as well as impact on the public should upward review of the stamp duty rates be implemented. Thus, the rates should be equitable and commensurate to the benefit that the underlying document yields the tax payer.
SDA provides the legal basis for the imposition, application and administration of Stamp Duties in Nigeria. The schedule to the Act provides a list of dutiable documents and rate of tax to be imposed by Government. Duties are charged either as fixed or ad valorem rates on instruments and written documents. Instruments subject to stamp duties include; agreements, appraisement, instrument of apprenticeship, bills of exchange and promissory notes, bills of lading, conveyances on sale, leases, powers of attorney, marketable security, mortgages, policies of insurance, receipts, settlements etc.
Payment of stamp duties in respect of chargeable/dutiable instruments ensures that the instruments can be enforced and admissible in evidence in Nigerian courts. Failure to obtain appropriate stamping of dutiable instruments may render them unenforceable by a party seeking judicial relief on account of a breach by a counter-party.
There are concerns with four primary areas of the SDA. These are:
$1• •Scope: The SDA at its current state is designed to impose duties on written documents, unlike other tax laws which are designed to tax business profits, gains from disposal of assets and transactions. While the scope of the SDA is very wide, seeking to capture an array of instruments, it is highly ineffective due to its unspecified scope.
$1• •Structure: The concern is that the provisions of the SDA appear obtuse. Taxpayers should easily understand what the obligations are under the SDA and should be able to ascertain the amount to be paid as duties. This is against the expectation that a good tax system should be simple and certain. The SDA, in its current state, does not reflect these attributes.
$1• •Administration: There is concern that the approach to the administration of the provisions of the SDA is unwieldy. It is crucial that the form of administering the Act is strategically detailed.
$1• •Rates: The description of the applicable rates in the SDA underscores its obsolescence both in functionality and application. Thus, there is the need to review the rates if the potential for revenue vide stamp duties would ever be realised.
To the extent that the SDA can be leveraged to deliver potential additional revenue per annum in the sum of N50b, there is obvious reluctance to repeal the SDA.
S.4 (1) and (2) of SDA empowers the Federal and State Governments to impose, charge, and collect stamp duties. The administration of stamp duties is therefore carried out through the Federal Inland Revenue Service (FIRS) and various States Internal Revenue Service (SBIR). FIRS collects duties imposed on documents relating to matters involving a company while the various SBIR has the authority to collect stamp duty in respect of documents executed between individuals.
FIRS is at the vanguard of an exercise geared towards revamping the framework for the application of stamp duties in Nigeria. In re-enacting the SDA to meet the expectations and realities of the Nigerian economy for the 21st century therefore, the following should be considered:
$1• •the necessity for fiscal federalism: The exercise by FIRS should be holistic and ensure that the interest of States of the Federation are taken into consideration as a demonstration of the significance of fiscal federalism. The Nigerian Constitution that provides the basis for the allocation or otherwise distribution of taxing powers in the Federation is a Federal Constitution and not a unitary one. In this spirit, the relevant principles that will underpin the revamped framework should be jointly set such that the National Assembly can enact same in a new stamp Duties legislation for the Federation whilst each House of Assembly enact the applicable stamp duties law in the States respectively.
$1• •utility of interventions previously made by the JTB to paper the cracks and any initiatives that is deemed relevant e.g. a significant example is the exemption of share transfers from stamp duty which JTB has pushed but which has been ignored in practice.
$1• •the impact on the overall cost of doing business in Nigeria as well as impact on the public should upward review of the stamp duty rates be implemented. Thus, the rates should be equitable and commensurate to the benefit that the underlying document yields the tax payer.
Culled from http://www.ngrguardiannews.com
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