10 Things Wrong With CBN N50 Stamp Duty

The best things in life, it is said, are free, but sooner or later the government will find a way to tax them. Truth be told; nobody likes taxes. Even renowned English statesman, Winston Churchill, has said, “there is no such thing as a good tax.” While we acknowledge the imperative of taxation, we must condemn, in strongest terms, taxes that are arbitrary and illegal such as the one recently introduced – the N50 stamp duties imposed on bank customers via the Central Bank of Nigeria. Here are 10 things I believe are wrong about the tax:
The first thing I do not understand is how the tax rate of N50 was reached. The CBN, by the circular dropping the bombshell, stated the legal basis for the directive to be the Stamp Duties Act, among others. Curiously, the tax rate stated in the said Act for money receipts is 2Kobo!

The cardinal rule of taxation is that there can be no taxation without representation. Taxes can only be imposed by the representatives of the people in the legislature through laws that clearly state the tax base, the tax rate, and the taxable persons. Any deviation from this cannot be without a proper amendment of the taxing statute as provided for in Section 116 of the Act. The Federal Government and the CBN should point us to the relevant law or amendment justifying the whooping N49.98K increase in stamp duties chargeable on money receipts and stop hiding under the umbrella of the SDA, which in this case leaks.  As it is, it does appear that the CBN can wake up tomorrow and decide again that the tax rate is N100 or N200, and then casually refer us to the SDA.

Secondly, the phrase “stamp duty” presupposes the use of adhesive stamps. Section 2 of the Act defines “stamp” and “stamped” to the effect that a physical stamp has to be attached to or impressed upon the document to denote that stamp duty has been paid before the document was legally effective. The SDA lists the documents on which stamps may be used and they are all written instruments. Section 3 of the Act makes reference to instruments listed in the schedule. Also, Section 89(1) makes provision as to duty upon receipts, and this does qualify as an instrument under the Act. It provides that the expression “receipt” includes any note, memorandum, or writing…bill of exchange or promissory note…” There is no canon of interpretation that can expand the meaning of the word receipt to include transactions. Clearly, the category of things that fall under the meaning of the word are written documents. In fact, subsection (2), which provides expressly that an adhesive stamp should be used, further buttresses this point.

There has been no “stamping” or affixing of any “receipt” so far, yet depositors are being charged. Until the CBN directs banks to actually affix adhesive stamps to tellers for payments that fall within the tax net, there will be no justification for the imposition (i.e if this were the only thing wrong with the imposition).

Thirdly, and still bearing in mind the point above, you will imagine how difficult it is for anyone to agree that taxation of online payment transactions was in the contemplation of the drafters of the Stamp Duties Act 77 years ago. The SDA in Section 3 states that the duty is “…to be charged upon the several instruments specified in the schedule to this Act…” Also see Section 4. The duty is payable on instruments, and this brings us to the question of what instrument is generated when one transfers money from one account to the other through a click of the mouse, a text message or punching some keys in Automated Teller Machine? Is it the e-mail received or the text alert? What if I do not subscribe to these notification media? The point needs to be made here that if we will be joining other jurisdictions that no longer require a physical document to attract stamp duty, then a “transaction duty” must be passed into law or the Stamp Duties Act must be amended to allow same.

Fourthly, if the FG/CBN wishes to implement the SDA, then it should implement to the letters and not pick/choose. The tax base under the SDA is for transactions of N4 and above. While the argument might be that the N1000 threshold was set to reflect current realities, the way to do that is by an amendment of the Act. It is unconstitutional to correct an outdated Act by a circular.

Further, the CBN circular was addressed to DMBs and other financial institutions, which are mere collection agents and not the customers, who are the taxable persons. Who are to even pay this tax? The banks or the customers? If it were the customers, would it not have been courteous to tell the customers that they  would start losing money for certain transactions rather than tell the bank to remove the customers’ money?

I believe the action of the Federal Government is unconstitutional. N50 (or any amount whatsoever belonging to me) is my property and my right to that property is protected under the 1999 Constitution. Section 44 of the 1999 Constitution as amended provides that: (1) No moveable property or any interest in an immovable property shall be taken possession of compulsorily and no right over or interest in any such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the purposes prescribed by a law…”

The above provision must be read along with its subsection (2) which provides that
“Nothing in subsection (1) of this section shall be construed as affecting any general law for the imposition or enforcement of any tax, rate or duty. Now, the point has to be made here that even though an exception is created under subsection (2)(a) concerning the imposition or enforcement of any tax, rate or duty, it is not unreasonable to say that the contemplation of the supreme law of the land is that such tax, rate or duty must be one which is traceable to an Act. In this case, the N50 transaction tax imposed by the CBN/FG via a circular has failed to find its legitimacy from the provisions of the Stamp Duties Act under which they hide. It is not enough to hide under the Stamp Duties Act or any tax law that appears to be convenient. Thus, it is my opinion, that this tax is illegal.

If it is argued that the SDA had always contemplated taxing these stated transactions, the natural question to be asked from this then is: why is the government just waking up to tapping this “goldmine”?
We should note that the duty is only payable on receipts in acknowledgment of services rendered.  By mandating the banks to withdraw N50 from all deposits into accounts, the CBN is making a very wide assumption that all monies coming into the account (except those exempted) are for services rendered. I ask; what if someone makes a gratuitous payment into my account?

The Federal Government, also in an attempt to justify this imposition, claimed that banks and other financial institutions will be complying with “a court judgment with Suit No FHC/L/CS/1710/2013”. It is submitted with respect that the case with that suit number did not consider the question as to whether the tax is legal or illegal. Therefore, it cannot be the basis of an imposition of a new tax. Neither can the CBN regulations be validly used to impose a new tax regime in a democracy. At best, a regulation can set out the mode for the collection of  tax or be used to regulate activities of players in the financial industry.

Double Taxation. Double taxation is a taxation principle referring to taxes that are paid twice on the same source of income. Cheque books already contain express statements that stamp duty has been paid on every leaflet of the Cheque book. Thus, double taxation on bank transactions is imminent in the light of the imposition of N50 on transactions.

March 31, 2016