When the Finance Minister, Kemi Adeosun, told Nigerians earlier in the year that some steps were being taken to ensure that the federal government expands the scope of coverage for taxable Nigerians as well as go after those who have been defaulting, not a few scoffed at the idea.
However, with the strategic decision to create a window for tax defaulters, with the outlined consequences of not utilising that window, many began to take more than passing interest in their tax status.
Therefore, to demonstrate manifest commitment to its willingness to help steer Nigeria away from oil proceeds, the federal government swung into action. It created a scheme tagged theVoluntary Assets and Income Declaration Scheme, VAIDS.
VAIDS was created to help many Nigerians whose tax status were either not up-to-date, doubtful or lagging, to standardise, in a many of speaking, their tax positions.
The scheme is reflective of the Federal Government’s desire to bring many more eligible taxpayers into the tax net and encourage, with incentives of confidentiality as well as waiver of the interests and penalties, those who had knowingly or otherwise underdeclared or never declared previously earned incomes and acquired assets.
In addition to these, the scheme also offers tax defaulters the option of spreading payment of outstanding liabilities over a maximum period of three years as may be agreed with the relevant tax authority.
Recently, over 700 graduates were deployed by the VAIDS to nine states of the federation and the Federal Capital Territory (FCT) as Community Tax Liaison Officers (CTLOs). The objective of the deployment is to raise awareness about the scheme and taxation in general.
The states to which CTLOs have been deployed, according to a statement by the VAIDS office, are Lagos, Ogun, Enugu, Edo, Cross River, Delta, Oyo, Kaduna and Nassarawa.
Over the coming weeks, more CTLOs are to be deployed to Kwara, Niger and Adamawa states, with other states to follow. The CTLOs were deployed to their respective states of origin after undergoing an intensive week-long training on taxation and customer service in Abuja.
“They will be on the streets, markets, malls public places and visit offices,” the statement said. Job creation is one of the spin-offs of the VAIDS initiative, with the scheme expected to create a total of 7,500 opportunities for Nigerians as CTLOs through the N-Power scheme of the Federal Government.
VAIDS, an initiative of the Federal Ministry of Finance in collaboration with state tax authorities, is a revolutionary programme that provides tax defaulters a time-limited opportunity to voluntarily and truthfully declare previously untaxed assets and incomes.
The opportunity is accompanied by the decision of the Federal Government to waive punitive interests and penalties. VAIDS was birthed on 29 June via an Executive Order signed by Vice President Yemi Osinbajo (then Acting President) as a broad-spectrum solution to virtually all the defects in the country’s tax system, including negativity towards taxation.
“The Voluntary Asset and Income Declaration Scheme is specifically targeted at taxpayers, who have not been fully declaring their taxable income/assets; have not been paying the tax due at all; have been underpaying or under remitting; are under a process of tax audits or investigations with the relevant tax authority; are engaged in tax disputes with the relevant tax authority, but are prepared to settle the tax dispute out of court; are new taxpayers who are yet to register with the tax authorities; and are existing registered taxpayers who have new disclosures to make,” explained Adeosun.
The Minister added that it does not matter whether the tax default originated from undeclared assets within or outside the country, adding that VAIDS offers a once in a lifetime opportunity to declare outstanding taxes and regularize tax profile once and for all.
The view that VAIDS is a last-chance salon for tax defaulters is shared by many taxation experts. Mr. Ayodele Zubair, Executive Chairman of the Lagos Inland Revenue Service (LIRS), called on all tax defaulters to embrace the scheme, as it represents the last opportunity to escape heavy sanctions.
Zubair was speaking on the sidelines of the International Conference of African Tax Administrations Forum (ATAF), which ended in Abuja last Friday.
The LIRS Chairman said VAIDS could not have been introduced at a better time as it has enormous potential to expand the tax net, increase the country’s tax base and engender the culture of paying taxes.
He added that governments, both at the federal and state levels, have shown commitment to the success of VAIDS and warned defaulters to be truthful with their declarations, as there is a lot of information being shared locally and internationally on property ownership and other items.
“A lot of data mining is going on. A lot of data is being mined daily, both locally and internationally, on property ownership and the likes. So, people who do not take advantage of this programme will certainly have themselves to blame in the future because the government has the will to prosecute all tax offenders and will do so,” he said..
The LIRS Chairman equally stated that many Nigerians have started showing interest and confidence in VAIDS, a situation he said will get better because of the sincerity of the government.
“All over the world, no one wants to pay taxes except they are forced to. But we are currently very positive about the success of the VAIDS programme. We have received a lot of feelers.
It has generated a lot of enquiries. People are coming to us and want to know about the programme. They are willing to trust the system in terms of the confidentiality promised.
Over time, more people will be convinced on the entire idea. Some people think it’s a trick to catch them out, but is not. This is an amnesty programme about which the government is very sincere about and people should take advantage of it,” he stated.
Experts believe that VAIDS provides the perfect platform to awaken the tax culture and broaden the tax base in line with global initiatives designed to arrest illicit financial flows and tax evasion.
The experts explained that diligent use of information obtained via the Standard Automatic Exchange of Information (AEOI) standard and other instruments will boost the capacity of VAIDS to uncover previously concealed assets and revenue sources.
President of the Chartered Institute of Taxation of Nigeria (CITN), Chief Cyril Ede, described the prospects of the scheme as very bright. Ede reasoned that scheme will be greatly assisted by the decision of the Federal Inland Revenue Service (FIRS) to start the implementation of the (AEOI) in Tax Matters from 1 January 2018.
According to the CITN President, the implementation of the AEOI Standard will enable the FIRS obtain information, on an annual basis, from tax authorities in other countries where Nigerians own assets.
This, he explained, will be possible without specific requests being sent. Among items of information to be shared, he said, are specific details on the assets, dates of acquisition, sources of funds for such acquisitions as well as tax returns and liabilities before and after the acquisition of such assets.
When such pieces of information are received, he added, they could be used to implement anti-tax evasion measures. Tax experts have also pointed out that the agreement to share bank information, under Common Reporting Standard (CRS), among countries such as Argentina, Indonesia and Italy, which have schemes similar to VAIDS, will help in tracking Nigeria’s taxes taken abroad.
Mr. Augustine Nwankwo, an Abuja-based tax expert, reckons that VAIDS is exactly what the country needs at this time and urged Nigerians to embrace the programme.
“The VAIDS programme is exactly what the Nigerian tax system needs at this time. Tax amnesty schemes have worked elsewhere and I believe it will also work in a Nigeria.
Nigeria needs VAIDS,” said Nwankwo. Experts are also of the view that the synergy among revenue agencies at the state level, under the umbrella of the Joint Tax Board, will make VAIDS a success.
“The new scheme will contribute immensely towards boosting their much-needed internally generated revenue.
The collaboration between the FIRS and state governments to tackle the problem of lack of full disclosure of assets and income, non-filing of tax returns and tax evasion and avoidance is laudable,” said Gbolagun Bamisaye, a chartered accountant.
The Federal Government, through VAIDS, expects to raise an additional revenue of $1billion. Through VAIDS, the government equally hopes to raise Nigeria’s tax to GDP ratio from the current disturbing six percent, one of the lowest in the world, to a more respectable 20 percent by the year 2020.
The country’s current tax-to-GDP profile even looks less pretty when placed side by side with those of other developing countries. India has a 16 per cent ratio, South Africa has 27 per cent, while neigbouring Ghana has 15.9 per cent.
The concept of tax amnesty was proposed by the Organization for Economic Cooperation and Development (OECD) in 2010. Since then, over 47 countries across the world have implemented the varieties of the programme.
These include South Africa, India, Indonesia and Turkey. The first phase of VAIDS runs from 1 July 2017 while the second phase ends on 31 March 2018.
The scheme covers all tax-paying individuals, companies, executors and trusts and all taxes collectible by federal and state tax authorities. These include Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Value Added Tax (VAT) and stamp duty.
For defaulters, who refuse the government’s offer of tax amnesty, sanctions await as specified in in Section 8 of the Executive Order. Among these are the full payment of outstanding tax liability and criminal prosecution.
Businesses, which comply but untruthfully, will suffer as whatever is paid on the declared liabilities may be considered as part-payment of the outstanding sum later discovered by the authorities.
While voluntary compliance is encouraged under VAIDS, a tax defaulter on whom interests and penalties have been imposed by a court order is not free from such, on account of complying voluntarily.
