Who bears burden of stamp duties on POS transactions? – TheNigerialawyer

Vincent Nwani

The Federal Government recently mandated the Central Bank of
Nigeria to strictly implement Merchant Service Charge which would
impose more charges on all point of sale transactions.

To this end, the CBN issued a circular to banks and other
stakeholders titled, ‘Review of Process for Merchants Collections
on Electronic Transactions.’ Accordingly, the Nigeria Interbank
Settlement System issued a circular titled, ‘Returns on Stamp Duty
Collection for Merchant Transactions.’ Both bodies are working
closely in setting remittance processes that ensure the collection
of stamp duty charge for PoS.

The new policy covers every transaction that occurs on PoS
platform, rather than previous regime where charges are allied on
aggregate transactions. Thus, for every PoS transaction of a N1,
000 or more, a stamp duty of N50 will be collected.

It is instructive that Nigerians are aware that this directive
has gone out, they must be aware that it does not change the prices
of goods and services they seek to buy but they will have to pay
extra N50 if they use the POS machine as a means of settlement.

For example, the directive does not change the price of fuel.
However, if anyone chooses to pay with PoS and what the person is
purchasing for a thousand naira or more, he or she will pay stamp
duty fee of N50 for each purchase respectively. For the oil and gas
retail business, customers are going to bear the burden of paying
N50 per transaction any time they choose to pay with PoS for
transaction value of N1, 000 or more.

Assuming you purchase 10 litres of petrol at the prevailing rate
of N145, the total cost is N1, 450. But with this new policy, if
you are to pay the N1, 450 using PoS, you will be incurring an
additional cost of N50, taking your total cost to N1, 500.

The downside of this directive is that customers may see it as
an increase in the pump prices of fuel or any other goods and
services. Therefore, there is an urgent need to educate consumers
and make it clear that this is a government instruction enforced by
the CBN. It is not an increase in price of fuel or any other
goods/services. It is also important to emphasis that people can
pay in cash and avoid the PoS stamp duty surcharge.

The new circular is basically a tax on the volume of
transactions and could rake in billions in stamp duty charge for
the government. Moreover, the banking public are seem to be
agitated by the increasing spate of charges on bank-related
transactions such as Stamp Duty of N50 on all account owner
initiated debit and PoS transactions, current account maintenance
fee of N1 per N1, 000 of all account holder initiated debits and a
charge of N65 per transaction on remote-on-us Automated Teller
Machines cash withdrawals and transfer charges on online and other
payment platforms.

The implementation of these charges in Nigeria is capable of
weakening the financial inclusion drive and financial development
goal as a whole especially within the environmental sphere of
business activities which point to enormous size of informal
market. It is also noted that the stamp duty charge is an
anti-financial inclusion policy as it is capable of discouraging
small businesses and the very poor from coming into the banking
space. We suggest that CIBN should make presentation to the
authorities for certain set of businesses, accounts and payment
platforms such as the PoS to be exempted from the stamp duty
charges.

Last Month, the Central Bank of Nigeria approved additional
charges for cash deposits and withdrawals above N500, 000 for
individual accounts and N3million for corporate accounts. The CBN
explained that the new charges on cash-based transactions are aimed
at reducing the amount of physical cash circulating in the economy
while encouraging more electronic-based transactions (payments for
goods, services, transfers).

If we are discouraging cash-based transactions, and at the same
time imposing multiple charges to electronic based transactions, we
may be running the risk of policy inconsistency capable of
aggravating the already tensed ease of doing business environment
in the country.

Dr Nwani sent this piece from Lagos

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