FG through FIRS is only an agent to states on collection of stamp duties – tax consultant

Stand up, collectively demand for Stamp duties revenues, Ubani tells 36 states

Chief Ubani, Uzoma Francis, (FCTI) is the Managing Consultant/CEO, Maroct Consultants Group and
Member, Taxation Standards and Practice Monitoring Committee of CITN. In this interview, with, EMMANUEL KEHINDE, he analyses issues around the Stamp Duties Act. Excerpts:

is there a clearly defined separation of collection of powers in Stamp Duties Act?
Nigeria’s operative constitution, the 1999 Constitution of the Federal Republic of Nigeria, as amended, made provision for different levels of authorities, responsibilities, and powers for each level of Government and how to finance the carrying out of its responsibilities for assigned activities. There are various statutory legislation in place to enable the various tiers of Government to carry out their respective duties. One of such legislation is the Stamp Duties Act, CAP S8, LFN, 2004, as amended, which makes provisions for the imposition and collection of revenue from stamp duties in respect of instruments made between companies, on one hand, and individuals, on the other.

Section 4 (1) of the Stamp Duties Act, 2004, as amended by Section 53 (a) of the Finance Act, 2019, empowers 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 two companies, and between a company and an individual, group or body of individuals i.e. corporate bodies.
While Section 4 (2) of the Stamp Duties Act, as amended by Section 53 (b) of the Finance Act, 2019, empowers the relevant tax authorities in different states of the Federation, to impose and collect duties on instruments initiated and executed and/or transactions initiated and carried out between persons or individuals, whether electronically done or otherwise by Bank Tellers or other documents within each of the different States territories.
Section 4 (1) and (2) of the Stamp Duties Act, 2004, as amended, clearly states what is collectible between the Federal Government of Nigeria, on one hand, and the different States of the Federation, on the other. The different States of the Federation are obviously 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, which was introduced by the Finance Act, 2020, to collect stamp duties on qualified chargeable electronic transfers, teller deposits and other qualified dutiable instruments initiated and executed between persons or individuals, within the territories of the different States of the Federation.
In the Finance Act, 2019, 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 transfer of N10, 000.00 and above made through any bank platform. The Finance Act, 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 introduced by the Finance Act, 2020, also did not render the provisions of Section 4 (2) of the Stamp Duties Act, 2004, as amended, ineffective, because any “Transfer Levy” paid by individuals on transfers between persons or individuals, is still collectible by the relevant Tax Authorities in the different states of the Federation.
Section 4 (2) of the Stamp Duties Act, 2004, as amended, still remains for the exclusive collection of the relevant Tax Authorities in the different states of the Federation. 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 Duty and/or Levy paid by individuals on qualified chargeable instruments, initiated and executed and/or transactions initiated and carried out between persons or individuals in their various States under the Stamp Duties Act, 2004, as amended.

It is very clear that the relevant Tax Authorities in the different states of the Federation, are to collect stamp duties and/or transfer Levies emanating from qualified chargeable instruments initiated and executed or transactions initiated and carried out between persons or individuals pursuant to Section 4 (2) of the Stamp Duties Act, as amended by Finance Acts, 2019 and 2020 respectively.

Could you explain the constitutional provisions?

Let us look at sections 162 and 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered:
Section 162 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, enjoins the Federation to maintain a special account to be called “Federation Account” into which shall be paid ALL revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the Armed Forces of the Federation, the Nigerian Police Force, the Ministry or Department of government charged with the responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.
Section 162 (10) (a) of the said Constitution provides thus: 162 (10) “For the purposes of subsection (1) of this section “revenue” means any income or return accruing to or derived by the Government of the Federation from any source and includes – (a) any receipt, however, described, arising from the operation of any law…”. Thus, stamp duties could be said to constitute “revenue” within the meaning of this section.
However:
Section 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered, provides thus:
“Where under an Act of the National Assembly, tax or duty is imposed in respect of matters specified in item D of Part II 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 tax or duty is collected by the Government of a State or other authority of the State, (such as SIRS) the net proceeds shall be treated as part of the Consolidated Revenue Fund of the State; (In line with Section 4(2) of the Stamp Duties Act)
What the Constitution is saying here-above is: Hey; the tax or duty the Government of a State or the State’s IRS collects here, belongs to that State in its entirety to keep, but that the net proceeds shall be treated as part of the Consolidated Revenue Fund of the State.
(b) where such tax or duty is collected by the Government of the Federation or other authority of the Federation, (such as FIRS) there shall be paid to each State, at such times 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 the State”. (In line with Section 4(1) of the Stamp Duties Act)
The intendment of the Constitution here-above is: Look-here, the tax or duty the Government of the Federation or the FIRS collects here, does not in any way belong to the Federal Government, that you; the FG/FIRS is “only an agent of collection” to the different States of derivation, and thereafter, there shall be paid to each State, a sum equal to the proportion of the net proceeds of such tax or duty that are collected/derived from the State. That you; the FG/FIRS is only entitled to agency commission, which is to deduct the cost of collection and/or administration cost, that is all. That You cannot keep the tax or duty so collected.
Paragraph 7 (Item D), Part II of the Second Schedule to the Constitution of the Federal Republic of Nigeria, 1999, as amended, which is on Concurrent Legislative List provides thus:
“In the exercise of its powers to impose any tax or duty on –
(a) Capital gains incomes or profit of persons other than companies; and
(b) documents or transactions by way of stamp duties.
The National Assembly may, subject to such conditions as it may prescribe, provide that the collection of any such tax or duty or the administration of the law imposing it shall be carried out by the Government of a State or other authority of a State”. (Such as States’ IRS).
Section 1 (1) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, proclaims its supremacy.
Section 1 (3) of the said Constitution, further provides that if any law is inconsistent with the provisions of the Constitution, the Constitution shall prevail, and that other law shall, to the extent of the inconsistency be void.

Are there court decisions and pronouncements to validate your assertion?

Yes. There are many of them. They include Uwais, CJN (as he then was) in interpreting the above-cited provisions of the 1999 Constitution, in the case of Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation (2010) 2 N.T.L.R. 902 at 943 para. F 944 para. B) held:
“It seems to me that the provisions of Section 162 subsections (1) and (10) of the 1999 Constitution, are general in nature, while those of Section 163 (b) of the Constitution, which deal in particular with Capital Gains Tax and Stamp Duties are specific. Therefore, the latter provisions override the former for generalibusspecialia derogant (i.e. special things derogate from general things). There are the Capital Gains Act, Cap 42 of the Laws of the Federation of Nigeria, 1990, as amended, and Stamp Duties Act, Cap. 411 which are “existing laws” under Section 315 of the 1999 Constitution. However, the Acts do not contain provisions pursuant to Section 163 of the 1999 Constitution, and as at now the National Assembly has not prescribed how the net proceeds of such tax or duty are to be paid among the States on the basis of derivation”.
In view of the Supreme Court decision in Attorney-General of Ogun State & Ors. Vs. Attorney-General of the Federation (supra) the National Assembly has put the requisite legislation under Section 48 (4) of the Finance Act, 2020, for the payment of the proceeds of stamp duties among the various States of the Federation on the basis of derivation.
How the net proceeds of such tax or duty are to be paid among the different States of the Federation is now provided under Section 48 (4) of the Finance Act, 2020, which provide thus:
48 (4) 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 paid as follows:
(a) 15% to the Federal Government and the Federal Capital Territory, Abuja; and
(b) 85% to the State Governments.
It, therefore, follows, that there is no basis for the provisions, as currently provided under Section 27 of the Finance Act, 2021, and therefore should be expunged in its entirety.
No Country can survive without the “Rule of Law”, it is not just possible. It is our ability to subsume ourselves to the operation of rule of law, that makes us different from animals, that removes us from that form of nature where life was short, nasty, and brutish. By the year 1885, Professor A. V. Dicey, had already discussed the concept of the rule of law, which in summary, is the subjection of all persons before the law, and equality before the law. Whether you be a Sovereign, President, Head of State, or the poorest and wretched of the earth.

Prof. A.V. Dicey’s rule of law, (The Constitution) means the absolute supremacy or predominance of the regular law, as opposed to the influence of arbitrary power, and excludes the existence of arbitrariness, or even of wide discretionary authority on the part of the government. Prof. Dicey regarded rule of law, as the bedrock of the British Legal System, to which Nigeria adopted: ‘this doctrine is accepted in the Constitutions of U.S.A. and India, as well’. No one is above the law!

So what are your parting words?
In summary, the different States of the Federation should take note that, in respect of the collection of stamp duties/levies revenue in Nigeria, the states are the principals; while the FG through the FIRS, is only “Constitutionally designated collection agent”. Therefore, the FG/FIRS is accordingly mandated by the provisions of Section 163 (b) of the Constitution of the Federal Republic of Nigeria, 1999, as altered, which means that FG/FIRS is obliged to follow the strict dictates and spirit of the said Constitutional Provisions. The orchestrated deception, unfair, and unwholesome collection practices should STOP, particularly in the payment of the net proceeds of the duties/levies collected, to the different states of the Federation in compliance with the Constitution which is the supreme law of Nigeria.
All the stamp duties revenue undeniably belongs to the different states of the Federation. I urge the various States, to, therefore, Stand pp and collectively demand for the Stamp Duties Revenue without fear or favour; it is your constitutional right to do so.