D. Murali

FOR a change, the recent news on stamp paper does not have the usual words Telgi and scam, but talks about the design changes. The new stamp papers are printed on special security paper with special security inks and printing techniques, they say.

And complexities of the security features are commensurate with the face value of the stamps, we are assured, so high-value stamps will be on special paper with `intricate security features'.

sThat should make it tough for fakers who usually start with a plain paper and end with a stamp paper. But let us start from the scratch on what stamp papers are.

"An Act to consolidate and amend the law relating to stamps," is how the Indian Stamp Act, 1899 begins.

It defines `duly stamped', as applied to an instrument; the phrase means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with law for time being in force in. And the phrase `impressed stamp' includes labels affixed and impressed by the proper officer, and stamps embossed or engraved on stamped paper.

States such as Maharashtra, Karnataka and Kerala have their State Stamp Act, while many States follow the 1899 legislation.

A few days ago, the Bombay Stamp Act was amended; accordingly, property owners have to pay 5 per cent stamp duty on 90 per cent of the market value of the property, instead of the earlier 5 per cent on the annual lease rental. Advertising contracts and also agreements whereby producers engage film stars are also subject to stamp duty in the State. There are variations between States on the rate of levy; the divergence of duties on the transfer of property, such as 12.5 per cent in Gujarat and Uttar Pradesh in contrast to Delhi's 8 per cent, is a factor that businesses consider when deciding on expansion.

The Finance (no.2) Act 2004 inserted the definition of `stamp' as "any mark, seal or endorsement by any agency or person duly authorised by the State Government, and includes an adhesive or impressed stamp, for the purposes of duty chargeable under this Act." One needed such a clarification after more than a century, perhaps because people had lost faith in the genuineness of any stamp paper in the wake of the stamp paper scam. No empty fears, because if you type, "stamp paper" in Wikipedia, `Abdul Karim Telgi' appears first.

Duty chargeable under the Act is stamp duty. In contrast to other duties such as of excise or customs where your compliance is usually seen in the form of an official chapa, payment of stamp duty leaves you with usually with special stationery called stamp paper to write your documents in, to use, that is, rather than affix, stamp.

Stamp duty, as Oxford Dictionary of Law defines, "is a tax payable on certain legal documents specified by statute." The duty may be fixed or ad valorem.

To ensure compliance, documents that are not stamped as per law are often not enforceable, and so inadmissible in courts as evidence. Stamp paper may be used both for judicial and non-judicial purposes, explains advocate Mr K. Krishnamurthi (Business Line, Apr 28, 2002). "Any stamp paper not used for judicial purposes is a non-judicial stamp paper... Stamps used in courts, say, for petitions, are called court fee stamps."

On the origin of stamp duty, http://en.wikipedia.org informs that the levy was first devised in the Netherlands in 1624 after a public competition to find a new form of tax. About seven decades later, the tax came to the UK, to finance the war against France. Over time, the duty had covered "newspapers, pamphlets, lottery tickets, apprentices' indentures, advertisements, playing cards, dice, hats, gloves, patent medicines, perfumes, insurance policies, gold and silver plate, hair powder and armorial bearings," as The Free Encyclopedia recounts about the UK experience. However, after stamp duty was largely abolished about two years ago, there have been variants of the tax. Thus, SDLT or Stamp duty land tax is a self-assessed transfer tax; and SDRT or Stamp duty reserve tax is on transfer of shares.

The Tobin Tax Network is campaigning for "a small tax on sterling currency transactions", one learns from www.globalpolicy.org. It seems such a tax could raise £3 billion per year for international development!

On www.countercurrents.org, there is Kavaljit Singh's insight on how our Securities Transaction Tax is much like the stamp duty prevailing in many other countries.

If interested in research, `Stamp duty on shares and its effect on share prices' is the title of a paper on www.ifs.org.uk, the site of the Institute for Fiscal Studies.

Another, on www.ssrn.com, is `Stamp Duties In Indian States: A Case for Reform,' (September 2004) by James Alm, Patricia Annez and Arbind Modi. It points out that the tax has become the third largest revenue source for many Indian states, imposing a high compliance cost on taxpayers.

"Evidence indicates that the current high duty rates, coupled with weak tax administration, lead to widespread evasion of the tax through underdeclaration. This underdeclaration of property values directly affects collection of other taxes, among them, property taxes and capital gains tax," the authors reason.

"Stamp duty is a transaction tax. It impedes all transactions, even between unrelated parties," opines Raghuram Rajan, the author of Saving Capitalism from the Capitalists. According to him, the duty tends to stand in the way of an efficient movement of assets, as for example securitisation.

sIn the US, the tax has different name such as mortgage tax, intangibles tax, or documentary stamp tax, and is administered by the states. Stamp duty has a special place in the American War of Independence.

There would not have been a Boston Tea Party if England had not attempted to enforce Stamp Act 1765 on America insisting on a tax on every piece of printed-paper they used.

Stamp duty in Australia is a general revenue imposed on various types of instruments such as transfers and agreements for the sale of real estate, documented gifts, policies of insurance, mortgages, and transfer and issue of motor vehicle licences, as www.dtf.wa.gov.au summarises. Don't miss www.stampoutstampduty.com.au "dedicated to obtaining a fair deal for Victoria's property buyers," because that's where the highest stamp duty rates are said to prevail.

In Hong Kong, e-stamping is one of the methods of paying stamp duty, and it is a 24 hours service available at www.esd.gov.hk.

A demat of stamp paper was a proposal that Jaswant Singh announced in December 2003 as Government's response to counter fakes. "Be like a postage stamp. Stick to one thing until you get there," is what Josh Billings counsels.

Though in politics one may find it tough to stick to one partner, stamp duty is one thing that governments have been sticking to for far too long.

ZeroBase@TheHindu.co.in

(This article was published in the Business Line print edition dated May 18, 2005)
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