August 18, 2020
Benjamin Franklin is quoted to have said, ‘‘… in this world nothing can be said to be certain, except death and taxes’’.1 The reality of this phrase is likely to be seen in the approach that will be adopted by tax authorities around the world towards increasing revenue generation post COVID-19. As the economic impact of the pandemic continues to take a toll on economies around the world, it is expected that some economies will descend into recession. For example, it was recently announced that the United Kingdom (UK) is experiencing its first recession in 11 years,2 while the World Bank has projected that Nigeria may experience its worst recession in 40 years.3 As a result of these economic realities, it is expected that governments will tend to shift more attention to taxation in a bid to shore up their revenue.
One area that the Federal Inland Revenue Service (FIRS) has identified as having significant potential (the black gold) for revenue generation is stamp duty. In June 2020, an Inter-Ministerial Committee on Audit and Recovery of Back Years Stamp Duties was inaugurated to recover backlog of unremitted stamp duties.4 This seems to re-inforce the added attention which stamp duty has received since the amendment to the Stamp Duties Act (SDA) by the Finance Act 2019.
This article will discuss the relevance of the SDA in contemporary tax administration in Nigeria and analyze the key issues associated with the SDA, including the appropriate authority to collect stamp duty across the country, the current enforcement regime under the Act and the power to alter the stamp duty rates. The article will also provide recommendations for modernizing the administration of stamp duties in Nigeria.
History of Stamp Duty Globally and in Nigeria
Stamp duty was first introduced in Spain in 1637, it was originally a tax on items like paper, vellum and alcohol. Other countries in Europe introduced stamp duty as a form of tax, France (1651), Denmark (1657), Prussia (1682) and England (1694). Stamp duty was introduced in England primarily to prosecute a war with France.
In these countries stamp duty was introduced principally for the purpose of raising revenue. Subsequently, in addition to being a proof of payment of tax, it assumed other significance, for example, it began to confer genuineness and authenticity on products and also played the role of an anti-tampering and anti-reuse seal. By extending its use to stamping of legal documents, stamp duty assumed an additional role of conferring legal validity to transaction documents.
In Nigeria, stamp duty was introduced on 1st April 1939 as a charge of duty on instruments. Since its enactment, the SDA has not undergone any significant amendment until the enactment of the Finance Act, 2019 which introduced some amendments. Despite being in existence for over 80 years, the SDA has not been fully administered and implemented. However, as explained above, the drive for revenue generation seems to have rekindled attention and focus on the Act.