ADMINISTRATION OF STAMP DUTIES IN NIGERIA (CONCLUDING PART)
1.0. ADJUDICATION OF STAMP DUTY
PROCESS OF ADJUDICATION
It is the right of the taxpayer to seek the opinion of the Commissioner of stamp duties as to the amount of duty chargeable or payable on his instrument. When a person seeks the opinion of the Commissioner as to the amount of the duty chargeable, he is making an application for adjudication. Any taxpayer may require the Commissioner to express his opinion on the liability to the duty or the actual amount due, and as far as the opinion is duly expressed, the instrument may then be stamped with the amount determined.
Where the instrument is not chargeable to duty, a stamp to show that no duty is charged must be impressed on such instrument to prove its acceptability in court or otherwise. For that purpose, applicants have to furnish the facts and circumstances affecting the amount of stamp duty chargeable together with hard copies of the instrument and other supporting documents. The duty assessment is made according to the rates provided under the laws as may be revised from time to time by a resolution of the National Assembly.
LIMITATION OF ADJUDICATION
- Adjudication cannot authorize the stamping of an instrument after execution which by law can only be stamped before execution. Where the Court has ruled that an instrument is not duly stamped, subsequent adjudication cannot make it duly stamped.
- The adjudication process cannot prejudice rights that have been asserted and relied upon before it. This means that no two commissioners are permitted to adjudicate on one particular document once his counterpart has done so.
RIGHTS OF TAXPAYER IN RESPECT OF STAMP DUTIES ASSESSMENT
- Right to apply for adjudication from the commissioner of stamp duty and be issued a certificate indicating the expression of the commissioner’s opinion.
- Right to appeal against any duty assessment issued in respect of his instrument. Any person dissatisfied with the assessment of the Commissioner may challenge it by appealing to the Tax Appeal Tribunal established under Section 59 FIRSEA or he can appeal to the Federal High Court or the High Court of the state if the assessment was issued by the State Commissioner of Stamp duties within 21 days of such assessment and the payment of the duty. Where the Court decides that the assessment of the Commissioner is wrong, the Court is required to assess the correct amount of duty and the person shall pay the difference or get a refund where the amount already paid is more than the re-assessed amount.
- Right to be educated on any provision of the Stamp Duties Act by the Commissioner of Stamp Duties or any of his staff.
2.0. INSTRUMENTS NOT PROPERLY STAMPED
An instrument is considered to be improperly stamped where it does not carry the correct duty. An instrument that is not properly stamped may still be effective because failure to stamp a document is not an offence in itself; however, an improperly stamped document is inadmissible in a Court of Law. Also, the FIRS or a state revenue authority cannot sue for duty on an unstamped instrument.
Implications of an Improperly Stamped Document
The following are the implications of non-stamping of an instrument that is required to be stamped:
- Such an instrument that is not duly stamped in accordance with the law in force at the time it was first executed shall not be given in evidence. This disadvantage cannot be remedied by an agreement between the parties in such a case.
- Such an instrument is not admissible whether directly or for a collateral purpose.
- Cross-examination upon an unstamped document is not allowed.
Exceptions to the Admissibility Rule
The unstamped or improperly stamped instrument may however be admitted under the following conditions;
- Instruments tendered in evidence in criminal proceedings may be admitted despite not being duly stamped.
- Any instrument needed to prove an act of bankruptcy
- Where it is imperative to refresh the memory of a witness
- Where it may be used to prove fraud
- Where a plaintiff is trying to prevent a transaction from being implemented if it is believed that the agreement is void
- Where the instrument may be admitted subject to an undertaking that the instrument would be stamped later.
3.0. CONTRIBUTIONS OF STAMP DUTIES TO TAX REVENUE IN NIGERIA:
Stamp Duty is an excellent source of revenue to both the Federal Government and State Governments. The Federal Inland Revenue Service, for instance, from January 2015 to July 8, 2020, was able to collect stamp duties to the tune of =N=127,044,220,692.56 (One hundred and twenty-seven Billion, forty-four Million, two hundred and twenty thousand, six hundred and Ninety-two Naira, fifty-six Kobo).
4.0. OFFENCES AND PENALTIES UNDER STAMP DUTIES ACT
It is imperative to note that failure to comply with the provisions of the Stamp Duties Act may generally result in any of the under-listed consequences:
Prosecution for offences under the Act, payment of penalties or fines of various degrees, inability to use the relevant instrument as evidence in court or other judicial or quasi-judicial proceedings and may face enforcement actions by the relevant tax authority under Sections 110 & 111 of Stamp Duties Act etc.
Below are specific offences, penalties and fines provided under the Stamp Duties Act:
- Failure to disclose all the relevant facts and circumstances on an instrument to defraud the Government, a fine of =N=40 on conviction. [S.9 SDA]
- Any person who neglects or refuses to cancel an adhesive stamp is liable to a fine of N20 [S.11 (3) SDA]
- Fraudulent removal of adhesive stamps, or where any person sells or affixes to any other instrument or uses for any postal purpose any adhesive stamp which has been so removed, with the intent that the stamp may be used again, or sells or offers for sale or alters any adhesive stamp which has been so removed shall be guilty of an offence and liable on conviction to a fine of
N100 [S.13(1) & (2) SDA].
- Any approved person that enrols, registers or enters in or upon any rolls, books or records any instrument chargeable with duty, which is not duly stamped shall be guilty of an offence and liable on conviction to a fine of
N20 [S.25 SDA].
- Failure to stamp a document within the prescribed period of 40 days as provided, a penalty of
N Where the penalty exceeds N20 an additional penalty at the rate of ten per cent. [S.23(1) SDA].
- Failure to prepare a duly stamped instrument of admission or to make a duly stamped register attracts a fine of
N20 on conviction [S.27(2)SDA].
- Refusal of an appraiser to write out the amount of valuation and duly stamp same within 14 days after the making thereof, or if he first discharges the amount of the appraisement or valuation attracts a fine of
N40 on conviction [S.32(1) SDA].
- Issuing any unstamped bill or note, a fine of N20 on conviction [S.42(2) SDA].
- Failure to stamp any policy of insurance within one month, a fine of
N40 against every person that makes or delivers the policy or receives or takes credit for any premium or consideration. [S.87 SDA].
- Any person that gives a receipt liable to duty and not duly stamped, or refuses to give a receipt duly stamped or upon payment of an amount of
N400 or upwards, gives a receipt for a sum not amounting to N400 or separates or divides the amount paid with intent to evade the duty, a fine of N20 on conviction [S.92 SDA].
- The Managing Director of a company, the Secretary and other principal officers that issue a share warrant or any instrument to bearer without being duly stamped will be liable to a fine of
N100 on conviction. [S.96 SDA].
- Every person to whom a stock certificate to bearer or an instrument to bearer chargeable as a stock certificate to bearer is issued without being duly stamped shall be guilty of an offence and be liable to a fine of
- Every person that executes, receives, issues or takes by way of security any warrant for goods not being duly stamped will be liable to a fine of
N40 on conviction. [S.99(3) SDA].
5.0. CHALLENGES IN THE ADMINISTRATION OF STAMP DUTIES ACT
- With respect to the appointment of a Stamp Duty Commissioner, the Act did not state the qualification requirement of a person that can be appointed to the position. This office requires an officer that is experienced in the field of taxation to be able to adjudicate on an instrument presented effectively.
- The Stamp Duties Act did not make provision for enforcement of the non-admissibility of unstamped instruments despite the admissibility in principle. There is no sanction on those that violate the principle or on those that accept unstamped instruments.
- Fake stamped documents are still being accepted for registration without recourse to verification from the Tax Revenue Authorities.
- Section 22(1) of SDA requires judges, magistrates, arbitrators or referees to take notice of whether any instrument tendered before it has been duly stamped as required by law, but in practice, such has not been done and no action is being taken.
- The Stamp Duties Act is obsolete in context and content. A perusal through the sanction, penalty, fines and interest payable under the Act reveals that they are ridiculously low and do not reflect the current economic realities and the policy direction of the government.
- The rates of Stamp Duties on some instruments are too low and have led to a reduction in the needed tax revenue by the government.
- The Act did not provide clear guidelines on matters of residency. For example, where an instrument is executed by a person that resides in more than one state, the Act is unclear about which tax authority he is to pay to.
- There is a serious lack of awareness by taxpayers on the instruments that are subject to Stamp Duties and their respective rates in Nigeria.
- The Joint Tax Board should intensify efforts in creating public awareness on instruments that are required by law to be stamped and relevant fees payable.
- The Stamp Duties Act should be reviewed, re-organized, re-defined, simplified and should also state the extent and limit of the Commissioner’s powers, harmonize the list of instruments and increase the rates applicable to reflect current economic realities and the policy direction of Government concerning job creation in order to encourage investment.
- A special division of Federal or State High Courts should be assigned to handle stamp duties related matters where stamp duties offenders will be prosecuted to serve as a deterrent to others who might want to carry out such an act.
- Those responsible for implementing the law should intensify efforts in increasing awareness of its provisions through adequate publicity and give legal backing to ensure its effective enforcement by the authorities concerned to carry out regular inspection visits to all relevant agencies responsible for the keeping of rolls, books or other instruments liable for duty.
- Effective collaborations should be created between the Federal Inland Revenue Service (FIRS), States Internal Revenue Service (SIRS) and other relevant stakeholders.
- Inspection visits to all organizations where dutiable instruments are lodged for verification to recover unpaid duties will surely serve as a veritable tool for ensuring compliance with the law and increase in revenue accruing to governments at various levels from Stamp duties.
- More powers should be given to the Commissioners to enable them to make inspection visits to courts, land registries and other places where these instruments are being used without recourse to confirmation or verification.
- The manner of office copy archiving should be modernized from the traditional way of stockpiling to an electronic system of scanning and storing using high powered scanners.
The whole world is presently affected by the Covid-19 pandemic which has obliterated the economy of many Nations globally; Nigeria inclusive. There is therefore a need for Nigeria to look inward for ways of funding its huge budget and reduce its yearly challenge of budget deficit through increased tax revenue generation. Overhauling stamp duties administration is a veritable tool for achieving this purpose in line with the current National Tax Policy direction which is tailored towards increasing indirect taxes such as Value Added Tax (VAT) and Stamp Duties (SD) while at the same time reducing direct taxes such as Company Income-tax (CIT), Education Tax, Capital Gain Tax (CGT) etc.