Tax war worsens as 36 states sue FG over stamp duty
The tax war between the Federal Government and some states has taken a new twist as 36 states of the federation, through their Attorneys-General, have dragged the Federal Government to the Supreme Court over alleged failure to remit funds generated from stamp duties into state accounts.
This comes as the pan-Yoruba socio-political organization, Afenifere, lampooned the government over alleged actions and policies capable of impeding the practice of true federalism in Nigeria, just as it commended the Rivers State Government for initiating the legal process.
Meanwhile the Institute of Chartered Secretaries and Administrators of Nigeria, ICSAN, said states collection of Value Added Tax, VAT, might stop inter-state migration of Nigerians.
But the Lagos Chamber of Commerce and Industry, LCCI, said the face-off between the Federal Inland Revenue Service (FIRS) and Lagos and Rivers State governments over right to VAT collection may lead to harassment of businesses by agents of FIRS and the states at the same time.
The Attorney-General of the Federation and Minister of Justice, Mr. Abubakar Malami, SAN, was cited as the sole defendant in the suit marked SC/CV/690/2021.
The states are contending that they are legally vested with the authority to administer and collect stamp duties on all transactions involving individuals and persons within their territories, and not FG.
Specifically, they are urging the apex court to determine; “Whether having regard to the provisions of Section 4(2) of the Stamp Duties Act Cap. S8 of the Laws of the Federation of Nigeria read in conjunction with the provisions of Section 163, items 58 and 59 of the Second Schedule part I and items 7 (a) and (b) of the second Schedule part II and other provisions of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), the defendant (Malami) could claim, retain, distribute or in any other manner deal with the monies or sums collected as stamp duties on individual persons transactions within the respective states of the plaintiffs without reference to, concurrence of, input or agreement of the plaintiffs?
“Whether having regard to the mandatory provisions of Section 4(2) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria (LFN), the plaintiffs (all the state attorneys) are not the sole authority to administer and collect stamp duties on all transactions involving individuals/persons within their respective states? “To ascertain whether or not states are entitled to 85% of all stamp duties collected on electronic money transfer levy, on electronic receipts or electronic transfer for money deposited in deposit money banks and financial institutions, on any type of account to be accounted for and expressed to be received by the person to whom the transfer or deposit is made in the plaintiffs’ respective states.”
Upon determination of the legal questions, the states want the Supreme Court to declare that they are the sole authorities entitled to administer and collect stamp duties on all transactions involving individuals within their respective states.
They are also seeking “A declaration that the defendant is not entitled to collect, administer, or keep the proceeds of any stamp duties on transactions involving individuals within the respective states of the plaintiffs or any manner interfere with the Plaintiff’s right and authority in the administering the provision of Section 4(2) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria.
“A declaration that the plaintiffs are entitled to all the sums of money collected by the defendant as stamp duties through whatever source or means in their respective states from 2015-2020 and thereafter till the time of the judgment of this honourable court with respect to individual persons’ transactions.
“A declaration that the plaintiffs are entitled to 85% of all stamp duties collected on electronic money transfer levy, on electronic receipts or electronic transfer for money deposited in deposit money banks and financial institutions, on any type of account to be accounted for and expressed to be received by the person to whom the transfer or deposit is made in the plaintiffs’ respective states.
“An order of perpetual injunction restraining the defendant, by himself, privies, agents or any persons by whatever name or howsoever called from appointing anyone for the purpose of collecting Stamp Duties on individual persons’ transactions within the respective states of the plaintiffs henceforth.”
They are further praying the court for an order, directing FG to account for and pay back all monies collected by way of stamp duties on individual persons’ transactions within their respective states, from 2015 to 2020 and thereafter till the time of the judgment.
Likewise, the statement of claims added, “An order of the court directing the defendant to pay over to the Plaintiffs all the sum of monies amounting to One Hundred and Seventy Six Billion, Sixty Seven Million, Four Hundred Thousand Naira (N 176,067,400,000,00) representing ascertained and admitted collected stamp duties on individual persons’ transactions within their respective states for the period of 2015- 2020 and thereafter till the time of the judgment of this honourable court or any other sum as the plaintiffs may be found entitled by the honourable court.
The apex court has not fixed a date for the matter to be heard.
Commenting on the new front of taxation battle, Dr. Muda Yusuf, economist and former Director General of LCCI, said: “All arms and levels of government have a responsibility to uphold the constitution. This is what they have all sworn to do.
“If the position of the constitution is that stamp duty should be remitted to the federation account, then so be it. Doing otherwise would amount to illegality.
“It is interesting that the sub nationals are getting bolder and more assertive. We are beginning to see some flavour of federalism in governance. It is a good development.”
According to David Adonri, Managing Director/CEO, Highcap Securities, the fact that the FGN failed to distribute stamp duty revenue to states is an unprecedented betrayal of confidence as well as a sign that FGN is in a precarious financial situation.
He stated that the failure underscores the importance of the current impasse between the Federal Government and the Rivers and Lagos states government over Value Added tax (VAT) collection.
Wishing that the Federal Government has not gone bankrupt, Adonri said: “Stamp duty as tax, is a money spinner that ought to enhance the financial strength of all tiers of government. This mess calls to question the sincerity of FGN in collecting tax on behalf of other tiers of government. This underscores the importance of Wike’s VAT victory which forestalls the misappropriation of that revenue by FGN just as witnessed with stamp duty.”
While commending the action of Rivers State in challenging the FG over VAT, the Afenifere also urged other state governments to use the opportunity provided by the landmark judgments on VAT to explore other areas that the Constitution empowered them to assert themselves as federalists.
