Stamp Duty Rise from 0.075% to 0.08% on Capital Market Transactions
Nigeria put in effect the increase in Stamp Duty on Capital Market transactions from 0.075% to 0.08% effective from 7th of December 2020.
What is Stamp Duty?
According to Stamp Duty Act of Nigeria, it
is a tax payable on dutiable instruments either in physical or in an electronic form.
The administration of this tax can be Ad-valorem, that is, according to value
of the transaction, or a Flat rate, where a fix sum is charged on all
transactions.
Myths and Facts of Stamp Duty
Historically, Stamp Duty originated centuries
ago in Europe but became established in Nigeria as a result of Ordinance 41 of
1939. Prior to the advent of electronic technologies, a postage stamp had to
be attached to the document to denote that stamp duty had been paid before the
document was legally effective. The FIRS stated recently that, “postage stamp is
administered by NIPOST for the purposes of delivery of items and documents. It
does not denote duty and, therefore, not a substitute for the FIRS adhesive
stamp which is produced for the sole purpose of stamp duty payment as provisioned
by Section 5(2) of the Stamp Duty Act”.
Stamp Duty is of what Benefit?
Stamp Duty is a revenue source to the federal
government of any nation. The agency responsible for the administration of this
levy is Federal Inland Revenue Service (FIRS). As indicated by FIRS Chairman, Muhammad Nami; “ as
revenue from oil and gas continues to dwindle due to global fall in demand and
price, indirect taxes such as Stamp Duty remain the viable and sustainable
alternative revenue source for funding budgetary requirements by the Nigerian Government”.
Implications of Stamp Duty to Investors
· Portfolio Managers across
board would need to adjust their break even points on existing and subsequent
transactions to capture the new rate.
· Since Stamp Duty on Capital Market transaction is a function
of consideration, otherwise known as Ad valorem, investors would
cough out more money to government's pocket as their empathy to invest increases.
"Prior to the advent of electronic technologies, a postage stamp had to be attached to the document to denote that stamp duty had been paid before the document was legally effective. The FIRS stated recently that, “postage stamp is administered by NIPOST for the purposes of delivery of items and documents. It does not denote duty and, therefore, not a substitute for the FIRS adhesive stamp which is produced for the sole purpose of stamp duty payment as provisioned by Section 5(2) of the Stamp Duty Act”.
ReplyDeleteGoing by this quotation, what was being used prior to the production of adhesive stamps by FIRS and secondly, in section 5(2) quoted above, no where was FIRS empowered to produce stamps. FIRS Boss who made the assertion should not be making unsubstantiated trying to depend the clear usurpation of functions of a sister agency for pecuniary motives. That's the kind of greed that is bringing the country to its knees.