A national policy to significantly increase government revenue by charging stamp duties on financial transactions has run into a new storm. The commotion erupted after a member of the House of Representatives, Muhammed Kazaure, claimed that part of the revenue collected as stamp duty had not been remitted to government coffers. Immediately, the Presidency discredited the legislator’s claim, describing it as unfounded. In a country where transparency is in short supply and public trust has been severely eroded, the claims of both sides must be critically questioned and the truth clarified.
The allegations by the legislator, who represents the federal constituencies of Kazaure, Roni, Gwiwa and Yankwashi in Jigawa state, are weighty. He argues that in recent years, banks and other financial institutions have collected 89.09 trillion naira in stamp duties. Instead of remitting as required by law, Kazaure alleged, they colluded with public agencies to withhold 40 percent of the funds, while only 60 percent was remitted.
Quickly, Garba Shehu, spokesman for the president, Major General Muhammadu Buhari (ret.), fired at Kazaure. He said the stamp duty collection was nowhere near N89 billion. He recalled that Buhari had discontinued an earlier effort to trace the N20 trillion sum allegedly raised from the 2013-2016 stamp duty when project consultants demanded 7.5 per cent of the sum as a fee.
“The entire deposit of the banking sector is less than half of N89 trillion,” Shehu said. “In fact, if the Federal Government can find N89 trillion, it can pay off all its debt…. So, the claim of these so-called consultants and the dissolved committee is totally ridiculous and a complete mockery. This rebuttal addresses only part of the poser.
Interestingly, Shehu avoided the nitty-gritty; he did not provide details of the revenue earned from the tax since Buhari took office in May 2015. This, above all, is what Nigerians want to know; the public has an inalienable right to know the full details and amount of stamp duty revenue. Undoubtedly, as much money has been generated with the policy as bank transactions have skyrocketed, even through electronic channels. It is also curious that it was the Presidency that responded, not the Federal Internal Revenue Service, nor the Ministry of Finance.
By law, the Documented Legal Acts Law imposes “the rate of 0.75 percent on the authorized share capital in the constitution of a company or in the registration of new shares.” Banks and financial institutions are required to collect a levy of N50 on each eligible transaction above N10,000.
With the billions of transactions over the N10,000 threshold, there is apparently huge revenue being collected. The Nigerian Interbank Settlement System said electronic payments rose 78.04% to 220.93 trillion naira in October 2021, up from 124.09 trillion naira in October 2020. January-October 2020, total transaction volume was 1.55 billion, worth N120.42 trillion; total electronic transaction volume in the same period in 2021 increased by 79.17% to 2.76 billion, valued at N215.76 trillion. Assuming only half of the transactions were above the N10,000 threshold, the treasury should have accumulated substantial revenue.
But, typical of public accounting practices in Nigeria, the revenue generated by the tax has been kept secret. The initial controversy was over the N50 stamp duty charge on each transaction, which was considered excessive. To quell the protest, the government raised the eligible limit to N10,000, which many customers still consider too high.
By contrast, the UK does not charge stamp duty on transactions below £250,000 pre-COVID-19. To ameliorate the impact of COVID-19, the UK government has raised the minimum eligible transaction to £500,000. The Nigerian government should also revise the N50 fee downwards and increase the eligible transaction limit. The Central Bank of Nigeria is required to ensure strict compliance and fast dispatch by the banks.
Infuriatingly, the Nigerian government persistently loses revenue due to its carelessness and endemic corruption. The Single Treasury Account is an example; in 2015, the CBN fined two banks 4.8 billion naira for breaching the TSA in a 96.4 billion naira Nigerian National Petroleum Company Limited transaction. Another bank was charged N4 billion on the same NNPC account. In April 2016, the CBN fined four banks for various offences, including failing to comply with TSA remittances.
Huge revenues are also lost through the Integrated Personnel and Payroll Information System; the government also does not collect their taxes as and when they are due. Apart from the so-called “ghost workers”, IPPIS is so porous that the suspended Federation Accountant General, Ahmed Idris, and his accomplices, who are now on trial, were allegedly able to loot more than N109 billion. Around N30 billion has been recovered from him so far, says the Economic and Financial Crimes Commission.
In any decent climate, the government has a duty to render full accounts of revenue inflows from all transactions. Stamp duty passes through the formal financial system, and its details must be available to regulators and the treasury in real time.
The UK government operates transparently; members of the public can access details of government revenue and expenditure. Details are freely available on their website. Exceptionally, the Norwegian government publishes the tax returns of each individual and corporate entity for all citizens to read carefully.
Therefore, it is not enough for the CBN and NIBSS to simply report transaction volumes; or for the Presidency to claim money is not lacking. Global best practice is to put the details in the public domain. The CBN, NIBSS, FIRS and the Ministry of Finance must render full accounts of transactions, collections and remittances. Beyond the harsh rebuttals, the Buhari regime should infuse transparency into the system and end the controversy.
The National Assembly should insist on having the details. It should reform the Documented Legal Acts Law, forcing operators to provide full details of collections and remittances from financial institutions.