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Whether the Imposition of N50 Stamp Duty on Bank Transactions by Central Bank of Nigeria is Legal?
In a circular dated 15th January, 2016 the Central Bank of Nigeria stated that Deposit Money Banks (DMBs) and other financial institutions should immediately start charging N50 on all receipts given by any bank or other financial institution in respect of electronic transfer and teller deposits from N1000 and above. Payments, deposits or transfers to personal accounts by self are exempted from imposition of Stamp Duties. Any form of withdrawals or transfers from savings account is also not involved, and charges are only payable by receiving accounts.
To ensure strict monitoring of the process, the central bank has directed all commercial banks to open an account designated as NIPOST Stamp Duties Account into which all charges collected shall be paid, balances of which shall be transferred to a similar account at the CBN. Other financial institutions can choose which bank they wish to remit their collections.
The question to be answered by the following discourse is whether or not the N50 Stamp imposed on bank transactions is legal. For better treatment, this issue will be determined by way of logical questions.
1. Is the CBN is empowered to issue circular on payment of stamp duty in line with Stamp Duties Act?
Recourse is to be made to the Central Bank of Nigeria Act 2007. Section 2 defines the principal objects of the Bank to include ensuring monetary and price stability, issuing currency maintaining external reserves, promoting a sound financial system and acting as banker/advisor to the Federal Government.
Furthermore, Section 7(1) of the CBN Act provides that the Governor or a Deputy Governor appointed by him shall be in charge of the day-to-day management of the Bank.
A close look at the CBN Act reveals clearly that the management of the Bank is to be in accordance with the powers given to the Bank by the Act. The Act does not intend to empower CBN’s Governor to issue circular on the payment of stamp duty.
1.1. Which authority may make guidelines on stamp duties?
It is imperative to consider the provision of the Stamp Duties Act where Section 115 provides for the appropriate authority that can make guidelines on stamp duties. The provision confers such power on the Federal Government or a state. The Central Bank of Nigeria is an agency of the Federal Government but it s roles as provided by the CBN Act clearly does not extend to the issuance of stamp duties.
Thus, the begging question is which agency of the Federal Government can issue stamp duty or the circular on same?
Section 5 of the Nigerian Postal Service Act answers the question conclusively. It empowers the Postal Service to prescribe the amount of postage stamps and the manner in which it is to be paid…
The Act equally defines the Chief Executive of the Postal Service as a ‘Postmaster-General’ Section 6 of the Act provides that the Post-master General shall be responsible for the execution of the policy of the Board relating to the Postal Service.
It is therefore beyond apparent that it is within the powers of the Postmaster General to issue a circular on stamp duties as opposed to the CBN Governor. In conclusion, the CBN Governor lacks the necessary vires to issue circular on collection of stamp duty over bank transactions.
2. Can stamp duty be imposed on bank transactions?
Section 3 of the Stamp Duties Act provides that the duties to be imposed on instruments specified in the Schedule to the Act shall be the several duties set out in the said Schedule…
The Schedule to the Stamp Duties Act provides for the instruments that stamp duties can be imposed on with certain exemptions. It is imperative to note that the Schedule does not include deposits whether by cheque, cash, and electronic transfer. The Schedule specifically excludes any form of cheque from stamp duty. The Stamp Duties Act, clearly, excludes bank transactions (including all receipts given by any bank or other financial institution in respect of electronic transfer and teller deposits) from duties charge. It is therefore strange for the Central Bank of Nigeria to issue circular on collection of stamp duties on bank transactions when it is not statutorily empowered to do so and when the bank transactions are not included in the Schedule to the Stamp Duties Act.
It is a logical inference from the above that the imposition of N50 stamp duty on bank transactions by the Governor of Central Bank of Nigeria is illegal, null and void because (i) CBN or its Governor is not a Post-master General to issue circular on stamp duty (ii) Stamp duty cannot be imposed on bank deposits under the Stamp Duties Act and other enabling statutes.
In the landmark case of Macfoy v. UAC Ltd (1962) A.C. 152 at 160, Lord Alfred Thompson Denning defined the effect of a void act as follows:
“There is no need for an order of the court to set it aside. It is automatically null and void without more ado, though it is sometimes convenient to have the court declare it to be so. Any every proceeding which is founded on it is also bad and incurably bad. You cannot put something on nothing and expect it to stay there. It will collapse.”
It is understandable that Federal Government is devising a means of generating revenue through taxes and thus rates, however such should be done within the confines of the law. It is thus advisable for the Federal Governments and its agencies to consider and study the various statutes before making any policy.
The Stamp Duties Act (Amendment) Bill, 2017 was recently introduced to the House of Representatives and undergoing legislative process. The Bill seeks to expand the scope of the Stamp Duties Act and address the current ambiguities in the law. The Bill contains a total of 23 amendments to the existing provisions of the Stamp Duties Act (“SDA”), Cap S8, Laws of the Federation of Nigeria 2004.
First, the definition and scope of a “stamp” under the Bill has been expanded to include electronic, internet and Point of Sale (POS) transactions. Second, if passed into law, the Bill will legalize the current practice as directed by the Central Bank of Nigeria whereby banks charge stamp duties on deposits. The Bill however does not specify the amount of stamp duties to be charged on such deposits.
It is clear that government is seeking to legalize the current practice of charging stamp duties on bank deposit as well as expand the scope of the SDA to cover electronic and other transactions. It has been estimated in some quarters that the SDA could generate over N2 trillion annually for the government.
In any case, if the Bill is passed into law, it cannot be enforced retrospectively to reverse the court judgment that makes it illegal for banks to charge N50 but will take effect from the date of enactment.
David Akindolire 08063374494 email@example.com