All over the world, things have been quite different from ‘the norm’, for a while now. No thanks to the outbreak of the COVID-19 pandemic. Nigeria, just like other countries of the world has had her setbacks. To be more accurate, is still in the middle of her setbacks. On of the most alarming of these setbacks is the state of the nation’s economy. According to the Nigerian Bureau of Statistics, Nigeria’s inflation rate rose further in June 2020 to 12.56%. This recent inflation simply means that, the purchasing power of consumers (the citizens) has further worsened, and their ability to afford the same quantity of goods and services has reduced significantly.
Thus, it is a relief to see that some State Governments across the country have taken the initiative to relieve tax payers of their tax burden, a little. Just recently, Dr Okezie Ikpeazu, Governor of Abia State approved tax relief to tax payers in the State. The sectors affected by this relief include; PAYE, PIT, Capital Gains Tax, Property Tax, Lands, Tax Clearance (according to Daily Post). Other states such as Gombe State, Ebonyi State and Kebbi State have made the decision to grant tax concessions, tax reliefs and tax waivers respectively to tax payers.
While the attempts of several state governments to reduce tax burden are being applauded and welcomed by all, the FIRS has decided to look the other way. On the 21st of July 2020, the FIRS through a statement by the Director, Communications and Liaison Department of the Agency, Abdullahi Ahmed, announced a compulsory payment of 6% stamp duty on tenancy and lease agreements. These stamp duties are to be paid by tenants, and to be remitted to the FIRS by property owners.
What exactly is this stamp duty ‘matter’ all about?
According to Investopedia, stamp duty is the tax government place on legal documents, usually in the transfer of assets or property. Under the Stamp Duty Act, stamp duty is a payable on any agreement executed in Nigeria or relating, whatsoever, to any property situated in or to any matter or thing done in Nigeria.
Below is an example to explain the concept of the new stamp duty payment:
You want to rent a house that goes for #400,000 per annum. Ceteris paribus, you’ll have to pay; Rent (#400,000), 10% Agency Fee (#40,000), Legal 10% of the rent (#40,000) and an additional Stamp Duty of 6% of the rent (#24,000).
That’s a sum total of #504,000. Sounds unpleasing to the ears, right? This decision of the FIRS has come under great scrutiny.
There are several questions on the minds of Nigerians. Personally, i have my questions. However, I’ll ask just three of those questions.
1). Is this the best period to introduce this initiative (the payment of stamp duties)?
Nigerians at large are still lamenting about the state of the nation’s economy. Many people, especially private workers have been hit by the adverse effects of the pandemic. A period when there is a nationwide inflation and the purchasing power of citizens has been affected. A period where people are finding it quite difficult to make ends meet, and many are now without jobs. So, the question still stands, is it right to enforce the payment of the 6% stamp duty at a time like this?
2). What measures have been/are being put in place to ensure that owners of property will dutifully remit the stamp duties to the FIRS?
One issue that has plagued the taxation system of Nigeria over time is the issue of Accountability and Transparency. Now that the FIRS has stated that it is the duty of the property owners to remit the stamp duties, how will they (property owners) be held accountable by the FIRS? What system has been put in place to ensure that property owners will remit the stamp duties in full to the appropriate authorities? How accountable will the property owners be to the FIRS?
3). In a situation where property owners fail to remit the stamp duties to the government, will the tenants be unaffected from whatsoever inconvenience may occur if the FIRS decides to take actions?
Won’t there be a blame game between tenants and property owners upon the inability of the property owners to perform their duty of fully remitting the stamp duty to the FIRS?