Nigeria: NIPOST Cannot Enforce Stamp Duties … Agents Appointed For Such Purpose Are Illegal

Relevant Facts:

On 13 April, 2017 the Federal High Court sitting at Abuja (the Court), with the Honourable Justice G.O. Kolawole presiding, held the activities of the Nigerian Postal Service (NIPOST) in seeking to enforce the provisions of the Stamp Duties Act, 1939 (SDA) to be illegal. This pronouncement was made in the Suit No. FHC/ABJ/CS/869/2015 (the Suit) between Nigerian Bottling Company Ltd (NBC) as Plaintiff and NIPOST and one of its agents, Bethda International Merchant Nig. Ltd as Defendants.

NIPOST had authorised several agents, including the one it was sued with, to enforce the provisions of the SDA by compelling businesses, including NBC to purchase and affix NIPOST's N50 adhesive stamps on receipts issued by the businesses. According to NIPOST, this was pursuant to the provisions of Section 89 of the SDA. NBC objected to this action particularly because the stamp duty payable on receipts is 2kobo and not N50, more so that NIPOST cannot compel it to denote stamp duties by way of adhesive stamps. NIPOST counter-argued, among others, that NBC's action if successful will lead to loss of revenue by the Federal Government of Nigeria (FGN).

The Decision:

In coming to its conclusion in which it granted NBC's prayers, the Court held that NIPOST is not authorised by either of its establishment legislation, the NIPOST Act, 1992 or SDA to enforce the collection of stamp duties. The Court held further that NIPOST's engagement of agents for purpose of enforcing the SDA, by way of enforced sale of postage stamps, is beyond NIPOST's statutory powers. The Court applied the decision of the Court of Appeal in CA/L/437A/2017: Standard Chartered Bank Nigeria Limited v. Kasmal International Services Limited & 22 Ors (Kasmal Case) in arriving at its conclusion.

Our Thoughts:

The Courts have yet again exposed the contradictions in the SDA. In a previous update, we highlighted the issue with the bid of the Central Bank of Nigeria (CBN) to enforce the provisions of the SDA, apparently also in view of revenue generation for the FGN. In this update, it is NIPOST. Of recent the Stamp Duties Office of the Federal Inland Revenue Service (FIRS) issued letters, especially to operators in the financial services industry, akin to a desk audit of their stamp duties compliance. We may as well expect soon, a Court decision on whether payment of stamp duties is obligatory seeing that the SDA itself provided the consequence of not duly stamping a dutiable instrument

The subject-matter of this flurry of activities is the 78 years old SDA. Since its commencement, the SDA has yet to undergo any substantial review or amendment. The past activities of the Executive Arm of the FGN to unilaterally revise rates, including nominal rates, is beyond its powers. The SDA is a taxing legislation and only the Legislative Arm of the FGN, the National Assembly, can amend it, including donating some of its powers to review rates to the Executive Arm.

In December 2016, NIPOST sponsored a Bill at the National Assembly for the amendment of the SDA. The Bill, among others, seeks to compel the payment of stamp duties by way of NIPOST's postage stamps. On Wednesday, February 22, 2017, the Bill underwent first reading before the House of Representatives.

That the SDA should be amended is a good step, but one that must be perfectly taken. It should not be self-seeking. It should be more than seeking to force the stamping of documents by the affixture of NIPOST's adhesive postage stamps. It should be more than just reviewing rates or donating powers to agencies of Government - NIPOST, CBN, FIRS or any other Government institution. The revised National Tax Policy 2016 should be a starting point for any legislative action. The legislative process includes citizen participation and it will be right for businesses and all those being affected by the SDA or who would be affected by an amended SDA to actively participate in the current process.

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