The Nigerian government has reviewed its policy on stamp duty charges, levied on electronic payments.
According to Punch, the new proposed finance bill disclosed that the N50 stamp duty charge would now be levied on electronic payments above N10,000 as against payment above N1,000. The finance bill is a plan by the Federal Government to revamp tax administration in the country by introducing various tax increment
However, the new bill exempts bank transfers between two accounts owned by the same person or organization from stamp duty charges. The bill repeals a provision of the Stamp Duty Act 2014 which holds the threshold for receipts chargeable with stamp duty as N4 and above.
How did we get here? The Central Bank of Nigeria (CBN), through a circular released on the 17th of September, which majorly affected Point of Sale transactions, authorized banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions.
The directive, which took effect immediately, was widely rejected by industry stakeholders and Nigerians at large, with concerns that the policy would stern the cashless economy and financial inclusion agenda of the government.
Meanwhile, in recent developments, some merchants had upgraded their POS machines to automatically charge N50 for transactions above N1,000 to avoid the occasional backlash that comes with seeking customers’ consents before adding the charge manually during POS payments.
What this means: Since the tax is here to stay, the new N10,000 limit would have some of the following consequences.
- The increased limit would improve POS usage and prevent a total boycott of POS by small businesses/retailers.
- The new limit might assist the government put a balance in its quest to make the economy cashless and improve tax revenue.
- This might also reduce the number of customers requesting to pay in cash, shifting the tax burden to large and heavy shoppers.