The Story

On 13 January 2022, Anambra State Government (ANSG) sealed four branches of Guaranty Trust Bank Ltd (“GTBank” or “GTCO”), across the State. This was over an alleged failure of GTCO to remit stamp duties to the Anambra State Internal Revenue Service (AIRS).

The Stamp Duties Act was recently amended. The amendment introduced a N50 stamp duty or Electronic Money Transfer Levy (EMTL). The stamp duties/EMTL are payable on electronic receipts or transfers of money (N10,000 and above) deposited in any bank. ANSG believes that it has the right to receive the stamp duties/EMTL through its agency, AIRS, over transfer transactions between individuals within Anambra State.

GTBANK approaches the Court

GTCO was aggrieved by the act of AIRS for sealing its branches. As a result, the Bank sued AIRS, ANSG (through the Attorney General of the State), the Federal Inland Revenue Service (FIRS) and Central Bank of Nigeria (CBN). This was vide an Originating Summons filed on 24 January 2022 at the Federal High Court, Awka Division. (Suit No: FHC/AWK/CS/01/2022 – Guaranty Trust Bank Plc v. Anambra State Internal Revenue Service & Ors.)

GTCO argued that it remits the stamp duties/EMTL to the FIRS through the latter’s account domiciled with the CBN. This was based on its understanding of the applicable tax laws (Stamp Duties Act and the Finance Act) pertaining to the remittance of the stamp duties/EMTL.  The Bank also relied on the directives it received from the FIRS and CBN in that regard.

GTCO sought some declaratory reliefs to the effect that the continuous demand on the Bank by AIRS to receive stamp duty charges already remitted to the FIRS is intimidating, prejudicial and unlawful. The Bank also contended that the FIRS is the relevant tax authority that can demand, collect or recover any unremitted N50 stamp duty/EMTL from banks. GTCO relied on Section 4(1) and (3), and Section 89A(3) of the Stamp Duties Act (as amended by Section 27 of the Finance Act 2021). It claimed N1 Billion in damages and N10 Million as cost of action against AIRS and ANSG in addition to injunctive reliefs.

Notably, GTCO made no monetary claims against FIRS and CBN. The Bank only prayed the Court for an order mandating the FIRS and CBN to protect the Bank’s interest. This is by owning up to responsibility in respect of the stamp duty charges/EMTL in Anambra State within the 2015-2019 fiscal years which it duly remitted to FIRS.

Interestingly, the CBN sought to be excused from the case instead of showing its eagerness to stand by its directives to the Bank. As we shall later see below, the Court thwarted the intended move by the CBN.

The position of AIRS and ANSG

On their part, AIRS and ANSG argued that the AIRS is the relevant tax authority to administer duties in respect of instruments initiated, executed or carried out between individuals within Anambra State. They relied on the provisions of Section 4(2) of the Stamp Duties Act (as amended).

The compelling contention here is that GTCO is not a party to a transaction where an individual customer transfers money from his account with the Bank to another account of an individual who is also a customer of the Bank. In effect, GTCO is only an agent of the parties involved in the transfer transaction through the Bank’s banking platform. The Bank is therefore not a party to the transaction, strictly speaking. However, if the transfer involves a company as customer of the Bank, then the FIRS is the tax authority to collect the stamp duties by virtue of Section 4(1) and (3) of the Stamp Duties Act (as amended).

Court’s decision

On 20 September 2022, the Court delivered its Judgment. It granted the declaratory reliefs sought by GTCO, holding that the FIRS is the only competent tax authority having the powers to collect and/or recover the N50 stamp duty/EMTL from GTCO. It also set aside the ‘unlawful’ conduct of AIRS and ANSG for sealing the branches of GTCO. In addition, it made an order of perpetual injunction restraining AIRS and ANSG from demanding from GTCO stamp duty charges/EMTL in Anambra State within the 2015-2019 fiscal years.

The Court disagreed with AIRS and ANSG. It took the position that the electronic receipts and transfer of money transactions between customers is a banking transaction, and that the Bank is a party. The Court relied on the definition of “banking business” under Section 131 of the Banks and Other Financial Institutions Act 2020.

Also, the Court rejected the contention of AIRS and ANSG that Section 27 of the Finance Act 2021 is in conflict with Section 163 of the Constitution of the Federal Republic of Nigeria 1999 (as amended) which provides for distribution of tax revenues among the Federal and State governments. The Court reasoned that Section 27 of the Finance Act contains specific provisions that relate only to collection of arrears of relevant stamp duties/EMTL.

The learned trial Judge awarded N50 Million damages against AIRS and ANSG and N5 Million as cost of action in favour of GTCO.

Where the Court got it wrong

With respect, the Court erred in holding that FIRS has the authority to collect duties in respect of transfers between individuals. We may assume that the Bank is a party to the transaction. But this is only to the extent of its role in facilitating bank transfers. However, the AIRS has the authority to collect stamp duties/EMTL by virtue of Section 4(2) of the Stamp Duties Act. Where a company is involved in the transfers, FIRS has authority to collect the stamp duties/EMTL.

In fact, not a kobo of the money involved in the transfers between customers belongs to the Bank. The obligation of the Bank here is mainly to remit the taxes. Where only individuals are involved in the transfers, FIRS is not the authority to collect it. I submit that any contrary view will likely render the provisions of Section 4(2) of the Stamp Duties Act useless. Generally, it is trite that the duty of the Court is to interpret statutory provisions based on their literal meaning.

CBN’s unacceptable move

As mentioned above, while the FIRS stood by GTCO, the CBN sought to be excused from the case. It filed a preliminary objection urging the Court to strike out the name of the apex Bank from the case. This was contrary to all reasonable expectations. The CBN ought to stand by its directives to GTCO and participate in the proceedings.

The Court considered the CBN directives in question. It concluded that the CBN is a necessary and desirable party to the suit. The Court had no difficulty dismissing CBN’s preliminary objection. Nganjiwa, J. held:

I must say that the argument of the 4th Defendant/Applicant [CBN] that it is not a necessary party because the Plaintiff [GTCO] did not disclose a reasonable cause of action against it, is misconceived in law, and does not hold any water.

In upholding the case of GTCO, the Court mandated the FIRS and CBN to protect the interest of the Bank. This is by owing up to responsibility regarding the directives issued to the Bank.

Conclusion

In summary, the AIRS has powers to collect/recover stamp duties/EMTL over bank transfers between individuals within Anambra State. This is in line with Section 4(2) of the Stamp Duties Act (as amended). The decision of the Court to the contrary is not supported and may likely fail on appeal.

Appreciation

I appreciate Taiwo Oyedele, Emeka Chime and Emmanuel Akpeme of PwC Nigeria for alerting us on this case. Their report of the case was brilliant. I thank Mr. Akpeme for making a copy of the Judgment available to me.