If you are still in doubt if seeking redress on tax issues in a court of legal jurisdiction is viable in Nigeria, perhaps this development from last year’s highlight will intrigue you as a  Federal High Court in Asaba on Wednesday 9th December 2020, declared unlawful, illegal, null, and void the deduction of the sum of ₦50 as Stamp Duty charges from the accounts of commercial bank customers in the country.

The court also made an order restraining the Central Bank of Nigeria (CBN) and banks from making further deductions unless authorised by law.

The judgement from Justice Nnamdi Dimgba came as a result of a suit filed by a bank customer, Mr. Rupert Irikefe, challenging the continued deduction of Stamp Duty charges from his current bank account domiciled with Zenith Bank in Asaba, Delta State.

Irikefe had in 2019 instituted a legal action against the CBN, Zenith Bank PLC, and the Attorney General of the Federation as 1st, 2nd, and 3rd defendants respectively over the continued deduction of Stamp Duty charges from his current account in Zenith, despite a subsisting court order preventing banks in the country from making such charges.

Yes, citizens can seek tax redress in court, you can get more detail of this story in analysis and implication from The Nigerian Tax Review, Fourth Quarter, 2020.

The road to victory

In the suit he filed and argued by himself, Irikefe prayed the court to hold the CBN and Zenith Bank liable for acting in flagrant disobedience of a valid could order.

According to the plaintiff upon noticing several deductions of ₦50 and ₦100 from his bank account with the 2nd defendant being Stamp Duty charges, he had paid two visits to the bank branch in Asaba on September 14, 2018, and October 11, 2018, and told them their action contravened the judgment of the competent courts in the country including the Court of Appeal.

He lamented that rather than refund the monies so far collected, the 2nd defendant continued to make further deductions on claims that they were following the lawful directives of the first defendant.

He further asked the court to hold that the conduct of the first and second defendants to continue to make a deduction in the name of Stamp Duty despite the subsistence and or awareness or the court of Appeal judgment is arbitrary, unlawful, illegal, etc.

He accordingly prayed the court to make “ an order setting aside the imposition, deduction and or remittance of Stamp Duty charges.

Plaintiff also prayed for the sum of ₦50 million as general damages and another ₦50 million as exemplary damages.

The Judgement

Delivering judgment, Justice Dimgba who noted that the first defendant “acted in bad faith”, said, “I have never ceased to wonder, the practice that is very much exacerbated in current climes, where agencies of the government treat decisions of Court of law with disdain and to carry on as if those decisions were not in existence”.

The judge also noted that the second defendant willingly disobeys the judgment of court when it acted recklessly and at its peril to continue to deduct Stamp Duty charges from the plaintiff’s account in the face of clear and binding judicial decisions arising from judicial proceedings which the second defendant itself participated.

“All things considered, it is trite that a judgment not appealed against or set aside by a higher court is valid, subsisting and binding on all parties”.

While upholding the argument of the plaintiff, Justice Dimgba further held that the defendants did not place before the court any judgment or order of superior courts overriding the one’s plaintiff anchored his case on.

He further held that the defendants failed to present to the court any amendment to the Stamp Duty Act empowering them to continue to make the deductions.

“In the absence of the above, it is irresistible to say that the suit has merit and should succeed.

“I hereby resolve the questions posed in the Originating Summons in favour of the plaintiff.

“I enter judgment in favour of the plaintiff on the following terms. Reliefs 1,2,3,4,5 and 8 are hereby granted.

“Relief 6 is refused. 7 is granted but limited to the sum of ₦2 million.

“Cost of ₦500,000 in favour of plaintiff jointly and severally”.

The judge added that “This relief is granted to set an example that it is reprehensible conduct to willfully disobey decisions of the competent court of law”.

According to the verdict, the defendants failed to present to the court any amendment to the Stamp Duty Act empowering them to continue to make the deductions..

Is this a contradiction to Provisions of the Stamp Duty Act, SDA?

Stamp Duty works on the Framework of Stamp Duty Act

The Stamp Duties Act Cap. S8 LFN 2004 can be traced to the 1893 Stamp Duties and Stamp Duties Management Acts passed by the British Parliament. It was enacted and came into force on 1 April 1939.

The Act, amongst other things, imposes stamp duties on written or electronic instruments (agreements, contracts, receipts, etc.) Under the Act, stamp duties may be levied either at an ad valorem or flat rate depending on the type or nature of the instrument.

Ad valorem means “according to value” so an ad valorem rate is based on the value of the transaction while a fixed rate as the name implies, means a specific amount regardless of the value of the transaction.

Backed up by Finance Act?

The Finance Act 2019, particularly section 52, expanded the scope of the SDA to capture electronic transactions. The Finance Act 2019 in section 54 which amended section 89 of the SDA also expressly introduced stamp duties on bank deposits and transfers. This has been replaced by an Electronic Money Transfer Levy (‘EMTL”) now contained in a new section 89A of the SDA (amended by section 48 of the Finance Act 2020.

Setting Issues in Proper Perspective

You should know that by extant laws, deposit money banks and other financial institutions receiving cash deposits of NGN 10,000 and above are required to charge a one-off NGN 50 levy. The levy is to be accounted for by the person to whom the transfer or deposit is made.

Matters Arising from Stamp Duty and Amendment

The Finance Act 2020 inserts a new section 89A to the Stamp Duties Act which imposed a levy referred to as the “Electronic Money Transfer Levy” on electronic receipts or electronic transfer of money.

Questions to Ask?

In view of the introduction of this levy, the Taxes and Levies Act of 1998 would require an amendment to accommodate this change. One is also tempted to ask if the new levy is still a stamp duty in which the States Internal Revenue Service remains the collection agency for electronic transactions between individuals? What is the legality of section 89A revenue sharing formula with regard to the derivation principle under section 163 of the 1999 Constitution without a Constitutional amendment?

Our Opinion

Taking extant laws into consideration, financial institutions like Zenith Bank are mere agents of collection of this agelong levy with the obligation to remit to the government which will be distributed as follows; 1. 15% to the Federal Government and the Federal Capital Territory, Abuja; and 2. 85% to the State Governments.

This scenario also depicts conflict between several court orders flying around and provisions of extant law. Will the tax regime’s fate continue to hinge on court order or constitutionally and documented framework? it is important to set the records straight.

The court ruling against the stamp duty legality is contrary to legal provision, making it seem like stamp duties are imposed by banks just like every other tax accrued to a bank transaction.

Taxmobile.Online urges that the judicial institution of the country tread with ease such that court orders don’t gradually replace extant laws. If a law does not reflect modern realities, then it should be amended appropriately.

However, since judges rule on prayers by legal parties in a case, legal practitioners should also possess a detailed grasp of extant laws and their amended versions before arguing tax issues in a court of competent jurisdiction. Taxpayers should also get informed and technical perspectives from professionals before taking legal action on any tax issue.

See major highlights of tax issues spanning October-December, 2020. Get in-depth analysis, expert opinion, projections, and even more as our yearly subscribers. Hit the comment box to know more.
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