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EDITORIAL

Stamp Duty On Real Estate, One Tax Too Many

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Nigerians were outraged when, recently, the Federal Inland Revenue Service (FIRS), ordered all property owners and their agents to charge six per cent Stamp Duty on all tenancy agreements they enter into with all tenants and remit same promptly to the Service. FIRS further explained that the directive was given so as to guard against the likelihood of anyone acting contrary to the Stamp Duty Act.

Also, it said that the party making the payment shall have the obligation to account for the applicable stamp duties. Some other Stamp Duty types and their rates are Appraisement or Valuation of Property, 1.5 per cent; Certificate of Occupancy, Partnership N1,000 flat rate; Gift of Land, 1.5 per cent, Legal Mortgage, 0.375 per cent, Legal Mortgage (Up stamping) 0.375 per cent.”

Others are deed of Conveyance or Transfer on Sale of Property, 1.5 per cent: Gift of Land, 1.5 per cent, Memorandum of Understanding (Related to Land, Sales, Joint Venture, Surrender, Subdivision Agreements, 1.5 per cent, Power of Attorney (Irrevocable/Land Related), 1.5 per cent and Sales Agreement, 1.5 per cent.

The public’s reaction to this evidence of an obvious possibility of over-taxing Nigerians compelled the revenue agency to issue a clarification to the effect that the policy would not necessarily result to an increase in rent. The agency did not expect to be believed on this given how the society works.

This newspaper observes that with the proclivity of real estate owners to increase rents at the slightest whim, this policy, no matter how minimal it may seem, will surely be an excuse for landlords to jack up their rents even above the six per cent and transfer same to their tenants. This is, unfortunately, how things work in this country.

Granted that the federal government is targeting about N1 trillion annually from stamp duty as it predicts collection to soon become second only to oil, it is our opinion that income or service taxes are not the only way to generate revenue internally especially in a situation where the tax net captures only those with regular income. Worse, in our view, those in private employment and the political fat cats who generate quantum revenue hardly record it for tax purposes. Indeed, we understand the position of the government which is to diversify the nation’s economy and increase its revenue base but this policy is coming at a very wrong time.

For instance, the World Data Lab’s Poverty Clock in 2018 indicated that about 90 million people – roughly half Nigeria’s population – live in extreme poverty. In June 2018, Nigeria overtook India, a country with seven times its population in this poverty race.

While Nigeria was still battling with this grim statistics, the Covid-19 pandemic, like a hurricane, hit the national and the global economy so badly and the country is expected to, in some few months’ time, go into recession.

The Vice President, Yemi Osinbajo-led Committee on Economic Sustainability Plan recently issued a warning that about 39.4 million people might be unemployed by the end of 2020, if the government failed to take pre-emptive measures.

The panel also warned that millions of other citizens might fall into extreme poverty before the coronavirus pandemic ends, as Gross Domestic Product (GDP) slides to between minus 4.40 per cent and minus 8.91 per cent. According to the committee also, the severity of the situation will depend on the length of the lockdown period and strength of the country’s economic response. The committee, we dare say, is diplomatically telling the federal government that 90 million Nigerians or more have no income worth taxing.

Sadly, most Nigerians presently have lost their jobs as many companies have downsized due to the impact of the Covid-19 pandemic. Similarly, there have been salary cuts for government and private sector workers.

It is pertinent to note that governments all over the world are rolling out measures to cushion the effects of the pandemic on their citizens. For instance, France has suspended rent payments and utility bills amid the pandemic crisis. The French government also mobilised 45 billion euros ($50.22bn) in crisis measures to support the economy expected to contract by one percent this year due to the pandemic. A substantial part of that amount is the deferral on all tax payments and payroll charges that companies were due to pay this month, and the cancellation of such payments for firms at risk of collapse.

Regrettably, in Nigeria, most companies are already groaning over multiple taxes imposed on them which is killing SMEs in the country. The Manufacturers Association of Nigerian (MAN) and (Centre for International Private Enterprise (CIPE) had identified multiple taxation as the bane of private sector business growth in Nigeria

In view of the foregoing, we call on the federal government to suspend stamp duty taxes in the real estate sector for now in view of the dire economic crisis in the country. While we have no grouse with the government in its bid to increase the country’s revenue base, imposing taxes on an already over-burdened citizenry is ill-timed and absurd.

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