By Mathew Dadiya, Abuja

The Federal Inland Revenue Service (FIRS) has said that Nigerians should accept the fact that the country can no longer rely solely on revenue accruing from its natural resources to fund the budget, hence the need to embrace taxation as the new normal of national fiscal policy.

The tax agency insisted at the weekend that its newly introduced   six  per cent  stamp duty on tenancy had come to stay despite criticisms from from some quarters.

At the weekend also a number of tax experts and Economics called for suspension of the new policy as they queried and the legality and timing of the new policy.

Director of Communications Liaison, FIRS, Mr Abdullahi Ismaila Ahmad  who spoke to  DAILY ASSET  on the new directive to tenants and landlords for the payment of the 6 percent stamp duty on rent,  clarified that the stamp duty was levied on the instrument of transaction and not on the payment itself. 

He explained that the 6% stamp duty was for tenancy above 21 years while 7 to 21 years lease or tenancy attracts 3% and less than 7-year tenancy is below 1%.

Reacting to the development, renowned Professor of Economics, Ken Ife argued that the Finance Act 2020 excludes persons whose turnover is less than N25 million from filing returns or paying tax. This according to him, means that the Landlord cannot collect such stamp duty rate from the tenant and cannot remit any such tax to the FIRS.

He urged the Federal Government to prevail on the FIRS to rescind its decision on the implementation of the tenancy stamp duty charge due to the impact of COVID-19 on the citizens and economy in general.

But the FIRS Communications chief, said that panelists and discussants on a webinar organized by a firm, OTISVIP, and which had in conversation, the Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Muhammad Nami, made the submission at the weekend that the stamp duty is a new normal which Nigerians must accept.

  According to him, the theme of the well-attended webinar was “Stamp Duty: The New Black Gold?” and it was hosted by Mr. Jake Effoduh, a Partner at Praxis & Gnosis Law. Panelists on the online discussion were Dr. Alexander Ezenagu, an assistant professor of taxation at HBKU, Qatar; Managing Partner, Sprout Digital, Mrs. Damilola Anwo-Ade; Director, VoguePay, Malam Mohammed Jega; Managing Director, Trace Anglophone West Africa, Mr. Sam Onyemelukwe; Founder, The Alpha Reach, Mr. J.J.Omojuwa; and Director, Tax Policy, FIRS, Mr. Mathew Gbonjubola.

He said that other management staff of the FIRS who participated in the webinar included Dr Asheikh Madugu.   

Executive Chairman, FIRS, Mr. Muhammad Nami, set the ball rolling with a detailed clarification on the Stamp Duty Act in Nigeria, which included the types of transactions dutiable under the Act as well as the respective applicable rates.

”While all panelists agreed on the need for taxation to complement government’s revenue flow from natural resources, a lively debate ensued on the timing of the Stamp Duty campaign and the public debate surrounding the application of tax revenue in the nation-building processes, especially in building public infrastructure, ” Mohammed stated.

The panelists stressed the need for prudent management of tax revenue even as they enjoined Nigerians to embrace the fact that the tax net needs to get wider to accommodate more citizens for holistic national development.

Mr. Gbonjubola stated that Nigerians must reassess the widespread notion that the country is rich, stressing that “in terms of Gross Domestic Product vis-à-vis our population, Nigeria is not a rich country when compared to a country like Botswana.”

Dr. Ezenagu urged governments at all levels to focus on expanding economic activities through economic diversification, stressing that this would have the positive effect of increasing the tax base as there would be more economic activities to tax, instead of increasing taxation on the citizenry.

A citizen contributor with the username Yusuf.Nibox said: “Stamp duty is unlike other taxes: It needs rigorous drive through sectoral specialist tax monitoring. flat rates e-transactions are the low-hanging fruits but the computational ad valorem rated stamp duty on contracts, agreements etc need driving through monitoring or some sort of purity measure to compel compliance.”

Another citizen – discussant with the username Cnjoku stated: “I have to disagree partly on the fact that non-stamping of documents doesn’t make it illegal. Transactions do not just occur in a vacuum. It has to be validated.

“For instance, if you make a land transaction, you must register it with the registry and get C of O to validate the ownership even when you have paid for it. Stamp duty on individuals is collected at state level where it is not fully enforced or even collected. I agree that the threshold on bank deposit is too low such that it affects the poor Nigerians.”

Meanwhile, some members of Nigerian Tax Research Team also faulted the introduction of the stamp duty saying that the FIRS did not do a wide consultation before introducing the policy.

Femi Damola, a tax expert, said ”I have taken a critical look at the new public notice (circular) on Stamp Duty on rent released by the FIRS last Monday. There are a number of confusion and misinformation around the 6%  Stamp Duties on rent.

”To start with, it is the right of the States IRS to collect tenancy rent agreements between persons or individuals.

”The power of FIRS kicks in when a company is a party. It appears FIRS is unmindful of this obvious statutory division clearly stated in Section 4 SDA.

”Most importantly to me, Section 163 (2)(b) 1999 Constitution mandates that revenue from Stamp Duties collected by FIRS should be distributed to the States on the basis of derivation.

”It is most likely that this would soon spark off Federal/State dispute and ultimately be resolved in favour of the States.

”Also, The Schedule to SDA does not impose 6% on all tenancy but only lease above 21years. Far from it. Majority of tenancy will attract under the statute 0.78%

He cited the SDA Statutory rates: ”Tenancy that is less than 7yrs (seven years) attracts 0.39 kobo for every N50 = 0.78% while tenancy greater than 7yrs (seven years but under twenty-one years) attracts N1.50k for every N50 =3%

Tenancy  Exceeding 21yrs (twenty- one years)…attracts 3.00 for every N50 =6%

He argued that the ”FIRS Circular has erroneously and arbitrarily ascribed the highest rate of 6% for all rent contracts. It is obvious that a Circular cannot override the letters of a Statute. I rest my case.”

Femi Oyedele, an Estate Surveyor and Valuer based in Lagos, argued that the circular doesn’t necessarily need stakeholder engagement.

He said, ”The circular is FIRS’s way of telling the public their interpretation of the Stamp Duties Act in the event they come for statutory tax audit review. The stamp duties act has been in existence for over 60years, the Finance Act 2019 merely included electronic documents as part of dutiable documents. I may not necessarily agree with all of FIRS interpretation but for the purposes of releasing circulars, they don’t require stakeholder engagement. Stakeholder engagement was required during the Finance Bill 2019 stage before enactment into law.”

Some members of the Nigerian Tax Research Team also argued that they don’t think the 6% on rent ”is legal or even enforceable.. “If I feel bad about it, I will challenge it in court and possibly get it voided not to call for anybody to resign.”