By Omodele Adigun and Charles Nwaoguji
THE recent implementation of the stamp duty regime nationwide may unwittingly thrown a spanner into the works of experts working round the clock to reduce the cost of doing business in the country unless something is urgently done.
Recall that, in line with the Federal Government’s drive to shore up non-oil revenue, the Central Bank of Nigeria (CBN) recently directed commercial banks as well as other financial institutions under its regulation, to, with immediate effect, commence charging N50 per eligible transaction in accordance with the provisions of the Stamp Duties Act and the Federal Government Financial Regulations 2009. The fee is charged on all receipts given by any bank or other financial institutions in acknowledgement of services rendered in respect of electronic transfer and other teller deposits from N1,000 and above.
The apex bank stated this in a circular titled: “Collection and Remittance of Statutory Charges on Receipt to Nigeria Postal Service (NIPOST) Under the Stamp Duties Act,”
Although, the tax is expected to yield about N66.1billion to the Federal Government’s coffers as part of non-oil revenue, but experts are worried that the policy has refused to take cognizance of Nigeria’s credentials in Ease of Doing Business. Recently, the World Bank Group recently the nation 169, out of 189 economies, in its Ease of Doing Business Index. This, for instance, prompted the Securities and Exchange Commission (SEC) to set up a committee to look into how in can trim transaction cost in its domain-the capital market.
Hear its Director General, Mounir Gwarzo:
“We did an excellent research and it shows that the Nigerian market is relatively expensive in terms of conducting transactions. A committee has been set up under the leadership of Ade Bajomo, the Executive Director of the Nigerian Stock Exchange(NSE), to look at how we can make transaction in the market a little bit cheaper. We believe that if the fees are relatively low, it will probably spur more transactions in the market. So what we may lose in the short term, in terms of drop in income, it may be compensated in the middle to long term by big transactions.”
Shortly after the SEC boss’ action, the news of Stamp Duty enforcement hit the investors with a jolt. This is coming less than two years after it secured a waiver from the Federal Government that was expected to last for five years. Recall that on October 27, 2014, the Federal Government gazetted the long-awaited exemption it granted to all commissions on stock market transactions from Value Added Tax (VAT), as part of measures to resuscitate the near-comatose bourse
The VAT exemption had, until then, been effective on commissions earned on traded values of shares, and payable to the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE) and the Central Securities Clearing System (CSCS). The exemption was to be effective for a period of five years according to the Federal Government gazette.
Commenting on the issue then, the Exchange’s CEO, Mr. Oscar Onyema, applauded the Federal Government for implementing the elimination of VAT on stock market transaction fees. He stated that this was one of the measures announced by the former Finance Minister, Dr (Mrs) Ngozi Okonjo-Iweala, in December 2012.
According to Onyema, investments should not be categorized as consumer goods purchases, but as a platform to promote a long term savings culture that could be channeled towards economic growth and development. Onyema added that “the elimination of VAT on stock market transaction fees will ultimately reduce the cost of transactions for investors, and will encourage investments in the Nigerian Capital Market”.
Onyema noted that the stamp duty waiver, which was also announced in 2012 by the Minister was yet to be implemented then. He expressed confidence that the Federal Government would expedite the implementation process in the interest of investors.
Reacting to its blanket implementation, despite the 2012 waiver, the President of Association of Stockbroking Houses of Nigeria(ASHON), Mr.Emeka Madubuike, said capital market transactions should be exempted from this policy in line with what had been canvassed since 2014.”We know that comparing Nigerian market with other markets, the cost of doing business here is high. What we should do is to reduce it as a way of also increasing the number of participants. In most part of 2014 and 2015, as part of reducing the cost of doing business in our country, we canvassed the elimination of stamp duty and VAT. That is really our position. And you know that during the period, we were able to get the government to eliminate VAT on capital market transactions. So as we speak today, there is no VAT on capital market transactions. Our position is that if this policy is sustained, it is going to increase the cost of doing business.”
To calm investors’ frayed nerves, Gwarzo said he had concluded plans to include members of the Federal Inland Revenue Services (FIRS) in the Capital Market Master plan Implementation Committee (CAMIC).
According to him, this would enable them brainstorm on issues concerning stamp duty in the capital market and how it could be waived to attract more retail participation.
Even the Manufacturers Association of Nigeria (MAN) has rejected the N50 Stamp Duty. According to its President, Dr. Frank Jacobs, the introduction of stamp duty for every transaction in the bank is not good one as this would add to the burden of doing business in Nigeria.
Jacobs stated that this is wrong time for the government to introduce stamp duty as the manufacturers are facing hard times.
For the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIM), Chief Bassey Edem, the stamp duty should not be mentioned as far he is concerned. He explained that the manufacturing sector is a critical growth driver for any economy. “It acts as a catalyst in transforming the economic structure of countries, from simple, slow growing and low value addition activities to more productive activities that enjoy greater margins”
Cbn had explained in its Stamp Duty Circular that all payments, deposits or transfer by self to self, whether inter or intra bank; and any form of withdrawals/transfers from savings accounts, are exempted from imposition of stamp duties. Also, the charges would only be paid by receiving accounts. The apex bank explained: “As part of efforts to boost its revenue, the Federal Government is exploring revenue opportunities in the non-oil sector, especially taxes and rates. It is in recognition of this fact that banks and other financial institutions are enjoined to support government’s revenue generation drive through compliance with the provisions of the Stamp Duties Act, LFN 2004 as reinforced by the court judgement in Suit No FHC/L/ CS/1710/2013.
“With immediate effect, all deposit money banks (DMBs) and other financial institutions shall commence charging N50 per eligible transaction in accordance with the provisions of the Stamp Duties Act and the Federal Government Financial Regulations 2009, that is, all receipts given by any bank or other financial institution in acknowledgement of services rendered in respect of electronic transfer and other teller deposits from N1,000 and above.
“Each bank shall open an account designated as NIPOST Stamp Duties Account into which all charges collected shall be paid. The balances in such accounts shall be transferred monthly by the banks to CBN NIPOST Stamp Duties Collection Account. Other financial institutions shall remit their Stamp Duty Collections to any DMB of their choice. Please be guided accordingly and ensure strict compliance.”
The 2016 appropriation sent to the National Assembly earlier Nigeria is expected to be funded majorly from non-oil revenue. In the budget estimates, non-oil revenues, comprising Company Income Tax (CIT), Value Added Tax (VAT), Customs and Excise duties, and Federation Account levies, will contribute N1.45 trillion. Value Added Tax (VAT) Exemption.