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Business News
Expert simplifies FIRS’ newly-introduced stamp duty
Following the confusion over the recently introduced stamp duty, an expert clarifies what is expected.
The Federal Inland Revenue Service (FIRS) recently introduced stamp duties on Certificate of Occupancy and house rent charges.
The development has left Nigerians with many questions, as most citizens feel that their economic plights would be further complicated by the additional tax burden.
About a week ago, Nairametrics reported the explanation provided by Taiwo Oyedele, the fiscal policy partner and West African tax leader for PriceWaterhouseCoopers (PWC) Nigeria, concerning the controversial payable percentage of the stamp duty.
Subsequently, a tax expert has offered some more insights/explanations on the new stamp duty charges. Albert Folorunsho, the managing consultant at Padebo Professional Services, gave the insights during an interview with Television Continental (TVC). Nairametrics monitored the interview session. See his explanations below.
What is stamp duty?
According to Folorunsho, stamp duty is not new; it has been a mode of instrument duty in the financial services space, especially in stockbroking and insurance. He described it as duties paid on instruments, which make the instruments legal while generating more revenue for the government.
He said that the major difference now is that the FIRS has decided to take it upon itself to generate duties on physical instruments.
Is it a flat 6% rate?
Due to the poor communication about the duty when it was announced, a lot of Nigerians confused it for a flat 6% rate on their rent/C of O charges. Mr Folorunsho however clarified that only payment of rent fees above 21 years got the 6% rate, while 7-21 years was at 3%. The rent for less than 7 years was dutiable by 0.78%.
Do you have to pay VAT after paying stamp duty?
Folorunsho said that if VAT were charged on a duty, there would be no need for stamp duties. He cited South Africa as an example, stating that the country removed stamp duties since 2009 as they did the work of VAT.
However, he added, “we need to ascertain what is dutiable by the government,” as stamp duties cause confusion, especially when there are exemptions.
The law states that any duty paid by a federal, state or local government is exempted from stamp duties, however, Nigerian banks still charge duties on duties paid these institutions. He called for further clarification on the subject.
Does stamp duty protect Nigerians?
Since stamp duty is basically proof of an agreed contract between a landlord and tenant, and a tenant who wishes to sue an erring landlord to court would have it easier with proof of stamp duty. It would reduce delay in the courts, Folorunsho explained.
Was the timing of the enforcement wrong?
“It’s the law,” he said, “But the government needs a human face. We are in a global pandemic and GDP per capita incomes have declined.” He advised the government to focus on companies owing, and charge where essential, because individuals may have issues paying their rents in an economic downturn.
Is the government going the right way in expanding the tax net?
Folorunsho is of the opinion that with the reduced revenue for Nigeria, due to a pandemic, it was rational for the government to bring policies to expand its tax net, as it could be too late by 2021.
“It’s all about government revenue, that’s why nonphysical and physical instruments would be charged…Nigeria runs the risk of reduced revenue by 2021, everything must be done within the law,” he said.
More insights
Stamp duties have always been around, though had not been broadly used till now. However, it could be beneficial to a tenant in a legal battle against a landlord, because it is legally binding proof of a contract between both parties. It also serves as a source of revenue generation for the government.
Charges that fall under VAT are exempted from stamp duties. Instruments paid by governments are exempted as well. In the same vein, only people paying rent up to 21 years fall under the 6% law.
Coronavirus
COVID-19: FG to launch Rapid Response Register for urban poor
The FG has moved to inaugurate an emergency intervention database for the poor residing in urban centres and affected by the pandemic.
The Federal Government has announced that it would inaugurate a COVID-19 Rapid Response Register (RRR), which would be a health emergency response for the poor living in urban centers that have been affected by the pandemic.
This was disclosed by Mr. Joe Abuku, Communications Manager, National Social Safety Nets Coordinating Office (NASSCO), on Sunday in Abuja.
Mr. Abuku said the register would identify Nigerians that have been made poorer due to the pandemic, targeting mainly Traders and SME Owners.
He added that the scheme was designed by the Ministry of Humanitarian Affairs, Disaster Management, and Social Development, through NASSCO, in partnership with the World Bank, and will be inaugurated by Vice President Yemi Osinbajo, on Tuesday, at Transcorp Hilton, Abuja.
What Joe Abuku is saying
- “This register is being built by NASSCO as an expansion of the existing National Social Safety Nets Project (NASSP). It targets small business owners, street vendors, petty traders, Small and Medium Enterprises (SMEs), and service providers.
- “Others are low wage employed individuals and families, including daily wage-based laborers, urban poor and destitute (persons with disabilities), and vulnerable families in slum areas, affected by the pandemic.
- “The category of Nigerians who will be in this register is typically the urban/semi-urban poor engaged in the informal sectors of the economy, who lost their source of livelihood due to the impact of COVID-19 on businesses and jobs. The Federal Government plans to extend cash transfers to households in this register for a period of 12 months.”
He also stated that NASSCO would use geographical satellite sensing to locale the wards where the urban poor live, as the targeting of the poor would be done via cell phone Short Messaging Service (SMS) technology that allows residents of targeted communities register to be assisted by following simple steps using USSD codes.
The SMS approach would be integrated through data gathered by the National Living Standard Survey Assessments and would be complemented by existing databases of Non-Governmental Organisations and local self-help-support groups.
- “Mobile phone numbers of those deemed eligible for assistance will be linked to digitized bank accounts to receive cash support, under an expanded cash transfer program of the Federal Government. These cash payments are designed to boost consumption for these households, build their resilience, and in some cases, inject fresh capital into small businesses.”
What you should know
- Nairametrics reported last year that the World Bank said the outbreak of the coronavirus pandemic could make an additional 5 million Nigerians poor.
- The Poverty and Shared Prosperity Report 2020 by the World Bank Group indicate that between 88 million and 115 million people could fall back into extreme poverty as a result of the COVID-19 pandemic.
- This is in addition to an increase between 23 million and 35 million in 2021, potentially bringing the total number of new people living in extreme poverty to between 110 million and 150 million.
Coronavirus
Covid-19: Nigeria needs serious controls not a second lockdown – House Committee on Education
A member of the lower legislative house has advised the government to focus on serious control measures to help prevent the spread of COVID-19.
Coronavirus
Covid-19: Ghana’s healthcare could be overwhelmed – President Akufo-Addo
Ghanaian President has warned that he might impose a partial lockdown as healthcare facilities are overwhelmed by growing cases of coronavirus.
The Ghanaian Government has warned that Ghana’s second wave of the coronavirus pandemic is rising fast and could overwhelm its already extended Covid-19 treatment centres.
This was disclosed by President Nana Akufo-Addo on Sunday in a Reuters report.
The Ghanaian President warned that he might impose a partial lockdown in the coming weeks as cases might reach peak levels.
Active cases in Ghana climbed to 1,924 from about 900 since the 5th of January. He also confirmed that the new variant was present in the country, as cases were imported from people entering Ghana.
The President said,
- “Our COVID-19 treatment centres have gone from having zero patients to now being full because of the upsurge in infections. At this current rate, our healthcare infrastructure will be overwhelmed.
- “Work is ongoing to determine the presence and extent of spread of the new variants in the general population.”
What you should know
- Nairametrics reported that the Federal Government also alerted Nigerians that hospitals across the country were running out of facilities to handle more serious cases of coronavirus infections, as the virus is spreading fast with mild symptoms in some victims and severe illnesses and death in others.
