Imposition Of Stamp Duty On Bank Deposits

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Stamp duty

The Central Bank of Nigeria (CBN) recently issued a directive to deposit money banks and other financial institutions to commence charging fifty naira per eligible transaction (bank deposits), ostensibly in accordance with the provisions of the Stamp Duties Act, 2004 and some Financial Regulations, supposedly made by the Federal Government in 2009.

CBN

The CBN has not informed the public of the particular provision of the Act it is relying for its directive. Neither has it made the content of the Financial Regulation it is equally relying on.

However, section 89 of the Act, headed “Provision as to duty upon receipts” provides as follows-

(1) For the purposes of this Act, the expression “receipt” includes any note, memorandum, or writing whereby any money amounting to four naira or upwards, or any bill of exchange or promissory note for the money amounting to four naira or upwards, is acknowledged or expressed to have been received or deposited or paid, or whereby any debt or demand, or any part of a debt or demand, of the amount of four naira or upwards, is acknowledged to have been settled, satisfied, or discharged, or which signifies or imports any such acknowledgement, and whether same is or is not signed with the name of any person.

(2) The duty upon a receipt may be denoted by an adhesive stamp which is to be cancelled by the person by whom the receipt is given before he delivers it out of his hands.

This is the only section of the Act that provides for stamp duty upon receipts. This is the legal foundation for putting adhesive stamps bought from NIPOST on receipts acknowledging payments as consideration for commercial transactions.

Before going further, it can be deduced from the language of the Act that the provision is applicable where the sum receipted constitutes one form of consideration or the other in a commercial or semi-commercial transaction, which ordinarily may not cover bank deposits.

However, to take it beyond any doubt as to whether bank deposits are covered or not, the Act provides for exemptions. One of the exemptions is –

“Receipt given for money deposited in any bank, or with any banker, to be accounted for and expressed to be received of the person to whom the same is to be accounted for, or for money withdrawn from a savings bank account”.

It is thus crystal clear that a receipt given for money deposited in a bank is not liable to stamp duty. The present illegal policy is born out of desperation and cluelessness concerning effective collection of stamp duty on receipts. This policy is based on the assumption that whatever money is being deposited to third party accounts constitutes consideration for one commercial transaction or the other.

This might not necessarily be so. It could be a salary account. The money deposit might be a benevolent gift requiring no receipt, for example, a wedding cash gift. It might be money for domestic purposes.

The policy also constitutes official extortion which will lead to imposition of double stamp duty on the same transaction. It a tenant pays rent to his land lord, he is required to be given a receipt with adhesive stamp of fifty naira. Where the tenant transfers the money virtually, under this newly imposed policy, the bank deducts fifty naira, but for the receipt issued to be tendered in court, there must be a stamp on it.

Apart from this, the Federal Government is short changing itself by adopting this lazy approach. According to the Act, a stamp duty is supposed to be imposed on every receipt for each sum of four naira (now one thousand naira, taking four naira of those days to be four pounds) or more. Effectively if a trader issues ten receipts for different transactions of more than one thousand naira each, he is liable for stamp duty of five hundred naira. If he however, at the end of the day’s business deposits the ‘monies’ in his account, he ends up paying nothing.

The Federal Government, must not out of frustration or desperation embark on illegality. It is clear from the provisions of the Act, especially section 116, that it is only the National Assembly that can by a resolution “increase, diminish or repeal the duty chargeable under any of the heads specified in the Schedule” to the Act.

Thus the Federal Government cannot by means of a financial regulation amend the Schedule to the Act and the exemption relating to “receipts”

(c) Ola Animashaun 2016

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