Some Provision of Finance Acts 2021, 2022 Unconstitutional, CITN Fellow Writes FIRS boss
Emmanuel kehinde,Ilorin
A Fellow of the Chartered Institute of Taxation of Nigeria, (CITN), Mr. Francis Uzoma Ubani, has argued that some provisions of the Finance Acts 2021 and 2022 are unconstitutional.
He also said the collection, recovery and distribution of revenue from stamp duties/electronic money transfer (EMTL) by the Federal Inland Revenue Service, (FIRS) is unlawful and contrary to the provisions of Sections 2(2) and 163 of the 1999 Constitution of the Federal Republic of Nigeria as amended.
He stated these in his letter to the Executive Chairman, FIRS, Dr Zacch Adedeji, which was made available to journalists on Tuesday.
He pleaded with the FIRS boss to direct the deposit money banks and other financial institutions to immediately begin to remit qualified chargeable stamp duties/EMTL accruable to the different federating States of the Federation, pursuant to Section 4 (2) of the Stamp Duties Act, as amended, to the “Relevant Tax Authorities in the various States of the Federation as applicable please.”
He also argued that it is not right as directed in paragraphs 5 (iii) and (iv) of the FIRS Press Release on Clarification on Administration of Stamp Duties in Nigeria, which stated that the FIRS is vested with powers to collect stamp duties on all banking transactions.
According to him, the powers given to the State Governments through their respective Revenue Authorities to administer stamp duties by ensuring the assessment, collection and accounting for stamp duties between individuals into the State Governments Revenue Accounts does not include banking transactions, Deposit Money Banks and Financial Institutions relied on in not remitting qualified chargeable stamp duties to the federating State Governments pursuant to Section 4 (2) of the Stamp Duties Act, as amended.
He opined that it is a very wrong clarification that is not supported by the applicable laws on the issue, based on the facts stated above.
He, therefore urge Adedeji to use his good offices to withdraw the perceived obnoxious FIRS press release on clarification on administration of stamp duties in Nigeria dated 20/7/2020 and replace it with a version that is consistent with the provisions of the 1999 Constitution.
Ubani wrote: “We respectfully write to bring to your attention and inform you that the amendment to the sharing formula for revenue from stamp duties/Electronic Money Transfer Levy (EMTL) as enacted in the provisions of Section 23 of the Finance Act, 2022, which amends Section 89A of the Stamp Duties Act, by substituting for subsection (4), a new subsection (4) as follows: –
“Notwithstanding any formula that may be prescribed by any other law, the revenue accruing by virtue of the operation of this section, shall on the basis of derivation, be distributed as follow: – (a) 15% to the Federal Government and the Federal Capital Territory, Abuja; (b) 50% to the State Governments; and (c)35% to the Local Governments”.
“This is clearly inconsistent with the provisions of Sections 2(2) and 163 of the Constitution of the Federal Republic of Nigeria, 1999, as altered, and therefore, should be voided, alongside with any regulation made by the Minister, pursuant to thereof, since the distribution of Stamp Duties/Electronic Money Transfer Levy (EMTL) revenue is statutorily based on DERIVATION, pursuant to the provisions of Section 163 of the said Constitution and should not be shared through “the Federation Account” pursuant to Section 162 of the said Constitution, without Constitutional amendment.
“It is pertinent to point out that the “Division of Taxing Powers” is contained in the Constitution of the Federal Republic of Nigeria, 1999, as altered. It appears that the prolonged military rule in Nigeria has bequeathed a highly centralized system of government as evident under our said Constitution. Under the 1999 Constitution, the Federal Government alone has power to legislate exclusively on 68 items or matters; hence the demand for decentralization or devolution of powers to States, particularly on taxation, but our tax system appears to remain in the firm grip of centralization.
“This is borne out by the provision of the Federal Inland Revenue (Establishment) Act, 2007, which attempts to centralize the administration of personal income tax, capital gains tax, and stamp duties, these are the three most important taxes currently being administered by the States, including Withholding tax, even though with the Federal government. However, the “Federal Government Taxing Power” in respect of these taxes are limited to residents within the Federal Capital Territory, members of the armed forces, diplomatic corps and non-residents and companies. However, the revenue collected by the Federal government from these taxes is constitutionally required to be distributed to the States on the basis of derivation pursuant to Section 163 (b) of the 1999 Constitution, as altered.”
He added: “The adoption of a FEDERATION in Nigeria, (see Section 2 subsection 2 of the 1999 Constitution) has far-reaching consequences for the structure of the country’s tax system, including the allocation of “Taxing Powers” between the different levels of government, the interaction between the different governments and their tax authorities, among other things.
“Therefore, Taxing Power is the ability or power of any government to levy tax or raise revenue through taxation, which may however, be retained by express constitutional limitations or in situations where its exercise may render nugatory some express constitutional powers.
“After a tax has been allocated to a particular level of government, it is important to determine the meaning of the said tax, as envisaged by the Constitution. Once a tax is allocated to a level of government, in the absence of an express provision to the contrary, all taxable persons will automatically come within the power of the particular level of government. It is obvious from the allocation of Taxing Powers under the 1999 Constitution that “taxable person” may be taxed by any of the levels in the Federation, in accordance with the respective powers under the Constitution, and nothing more. Each government requires that its powers cannot be taken away, altered or controlled by the Federal government.
“Likewise, all the States acting in concert cannot take away, alter or control the power of the Federal government. Therefore, within the context of taxation, both the Federal government and each of the States should have their separate tax administrative machinery established under their respective laws by their legislature.
“It is important and very necessary to understand the constitutional basis of “Division of Taxing Powers” in Nigeria. “
Ubani also said that the National Assembly has the exclusive powers in respect of all subject matters in the Exclusive Legislative List under Section 4 (2) of the 1999 Constitution, as altered.
According to him, in this regard Item 59 of the Exclusive Legislative List vests the National Assembly with power in respect of “taxation of incomes, profits and capital gains, except as otherwise provided by this Constitution”, making these taxes “Federal Taxes.”
He further opined that the National Assembly is vested with powers to make laws on any matter included in the Concurrent Legislative List to the exclusion of the Houses of Assembly of States.
He argued that Item “D7” or D, paragraph 7 of the Concurrent Legislative List (bearing “Collection of Taxes” as the marginal note) authorizes the National Assembly to delegate the administration of the taxes to the States “subject to such conditions” as the National Assembly prescribes.”
“We therefore, urge you, Executive Chairman, to use your good offices and withdraw the obnoxious FIRS Press Release on Clarification on Administration of Stamp Duties in Nigeria dated 20/7/2020 and replace it with a version that is consistent with the provisions of the 1999 Constitution