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Uproar over Proposed 6% Stamp Duty on Rents

-By Danlami Nasir Isah

The directive by the Federal Inland Revenue Service to landlords requesting them to collect 6% of tenancy/lease agreement has been greeted by public condemnation and backlash.

Although the FIRS in a clarification said the charge depends on number of years a tenant has spent Nigerians have still condemned the decision of the Service.

“Please note that Stamp Duties rate on Rent/Lease is graduated depending on the number of years in the Agreement: 1-7 years is 0.78%; above 7 years to 21 is 3%; above 21 years is 6%.

Muhammad Nami, Executive Chairman, Federal Inland Revenue Service (FIRS) who made the clarification stated that “Schedule to Stamp Duties Act, the part on Lease, states: For every N50 and also every fractional part of N50 of the rent of the year: if the term is definite and doesn’t exceed 7 years–39 Kobo or 0.78%; exceeds 7 years and doesn’t exceed 21 yrs–N1.50 Kobo or 3%; above 21 yrs– N3.00 (or 6%),”

A tenant, Musa Abdullahi who condemned the decision, accused the federal government of being insensitive to the plight of Nigerians.

He said “The federal government wants to make sure they tax Nigerians to death by all means. We are already in a serious economic hardship which was caused by the Coronavirus. Instead of the federal government to give vulnerable Nigerians palliatives, they are still looking for a way to collect from us.

“Many businesses have folded up. As we are speaking, I have friends and relatives with small businesses, but due to the lockdown, they had to sell everything and buy food.

“I can assure you they don’t even know where to get money and settle their next rent, let alone add another percentage to the government,” he added.

Another businesswoman who is also a tenant in the FCT, Amaka Kalu said although the federal government are looking for diverse ways of making revenue, the timing on stamp duty collections for tenancy and lease agreements was wrong.

She said “We all know that oil revenues have dropped drastically this year due to covid-19. The same goes to customs revenue, so the only agency that federal government is hoping on to get revenue is the FIRS, but the timing is very wrong.

“People are feeling the economic heat which the virus has brought. Even we business owners that make big profits before, we don’t see even half of that now so all we do is just manage the situation until it gets better.

“Therefore charging stamp duty on rents is not just proper at this time,” she further explained.

Kalu urged President Muhammadu Buhari to direct the FIRS to withdraw the decision in view of the current economic situation.

In the same vein, the Nigerian Institution of Estate Surveyors and Valuers has expressed disappointment over the imposition of stamp duties ranging from 0.78 per cent to six per cent of the value of rents and leases by the Federal Government.

The President, NIESV, Emmanuel Wike, said that “While property is universally acknowledged as a veritable vehicle of recovery from recession, albeit economic depression, it is a gross anathema to introduce a tax regime that will frustrate land and property transactions and development,”

He noted the 1.5 per cent ad valorem charges on Deeds, Power of Attorney and Memorandum of Understanding documents would stifle investments in housing and real estate and called for a flat rate stamp duty charge at a maximum rate of N1,000.

Wike further noted that, “Additional ad valorem stamp duty tax will further discourage investment in the real estate sector and exacerbate housing shortage in a country requiring about 17 million housing units to meet its shortfall.

“We hereby advocate a flat rate stamp duty charge in this category instruments at a maximum rate of N1,000.”

He said that the 1.5 per cent stamp duty tax proposed in valuation reports was an aberration since valuation reports did not fall within the definition of property instrument to be subject to stamp duty or any tax.

The NIESV boss added that the ad valorem rate on tenancy and lease agreements and deeds as applied across board was ultra vires.

Wike demanded the reverse of the stamp duty tax regime, noting that what was required of government were incentives, tax cuts and tax holidays, not burdensome taxes.

Similarly, the Nigeria Labour Congress has opposed the six per cent stamp duty fee for every tenancy and leases agreement stipulated by the Federal Inland Revenue Service.

It described the new tax as a financial burden on poor Nigerians at a time they were facing socio-economic pressure arising from the COVID-19 pandemic.

The NLC President, Ayuba Wabba in a statement recently said that “The Nigeria Labour Congress condemns the 6% stamp duty on tenancy and lease agreements in Nigeria.’

It stated, “The Nigeria Labour Congress rejects this new stamp duty policy on rents and leases as it would worsen the deplorable situation faced by Nigerian workers most of whom, unfortunately, are tenants.

“It is also alarming that we are having a rash of hike in taxes and user access fees when other countries are offering palliatives to their citizens.”

The union called on the Federal Government and the FIRS to rescind “this harsh fiscal measure as it is boldly insensitive to the material condition of Nigerians which has been compounded by the COVID-19 health insurgency.”

Wabba said nobody would want to be a tenant if they had an alternative, adding that tenants, which this new policy was targeting were some of the most vulnerable people in the society.

He noted, “It would be illogical, insensitive and inhumane to churn out laws that make our poor go to bed at night with tears in their eyes.

“The principle of public taxation, especially progressive taxation all over the world is that the rich subsidises for the poor. Every tax policy that would be enforceable must create a safety net for the poor. Recent policies of government indicate otherwise.”