Determined to improve Nigeria’s revenue base through taxes, the Federal Government last year initiated the Voluntary Assets and Income Declaration Scheme (VAIDS). In this report, CHINYERE OBIORA looks at the scheme, its implications on the economy and prosecution threat against tax defaulters
The Federal Government’s Voluntary Assets and Income Declaration Scheme (VAIDS), meant to encourage full disclosure of assets by Nigerians, has continued to receive rave applauses as a timely move towards increased revenue generation in the country.
Unveiled by the then Acting President, Professor Yemi Osinbajo, on Thursday, June 29, 2017 at the Presidential Villa, Abuja, the Scheme aims at broadening the country’s tax base with incentives offered to tax evaders.
An initiative that has the backing of an Executive Order, the Scheme, which promotes partnership between tax authorities at federal and state levels, targets Nigerian taxpayers with a time-limited opportunity for those concerned to regularize their tax status relating to previous tax periods and pay any outstanding taxes due.
Also, in exchange for fully and honestly declaring previously undisclosed assets and income, tax payers enjoy forgiveness of overdue interest and penalties, as well as the assurance of not facing criminal prosecution for tax offences or tax investigations.
Like every other milestone project in Nigeria, commendations are trailing the scheme considered as a well-thought out measure to correct obvious lapses and dislocations inherent in the nation’s tax and revenue generating system.
Interestingly, the Presidential directive extending the initial deadline from March 31, 2018 to June 30, 2018 may have come as a new grace period for everyone, but there is no denying the fact that the fear of naming and shaming as well as planned prosecution of tax defaulters has jolted many to do the needful.
There are encouraging signals that those who failed to declare their taxable incomes and assets; those not paying taxes at all; as well as those currently underpaying or under remitting their taxable incomes and assets, are now demonstrating readiness to change their warped ways.
With VAIDS applicable to all taxable persons (individuals and companies) as well as covering all federal and state taxes, such as Company Income Tax (CIT), Personal Income Tax (PIT), Petroleum Profit Tax (PPT), Capital Gains Tax (CGT), Value Added Tax (VAT), Stamp Duties, Tertiary Education Tax (ET) and Technology Tax, the government is focused on curbing tax evasion strategies deployed by multi-national companies and high network individual to undercut the system.
Noteworthy is the government’s decision to access the goodwill of existing international networks in reducing revenue loss; creating more awareness on the statutory function of every citizen to pay tax; encouraging investment and economic activities; improving tax compliance with the existing tax laws; reducing tax payers’ liability; increasing the country’s non-oil tax to Gross Domestic Product (GDP) ratio from six per cent to about 30 per cent.
However, the excitement generated in government circles over the Scheme is quite understandable given the worrying nature of tax compliance in the polity. This pathetic situation is amplified by the Minister for Finance, Mrs Kemi Adeosun, who lamented that of about 70 million economically active Nigerians, only about 14 million are fully tax compliance.
For Adeosun, despite Nigeria priding itself as Africa’s largest economy, its tax to GDP ratio of six per cent is worse than the tax to GDP ratio of other countries, including smaller economies like Ghana.
Also, Vice President Osibanjo had, while launching the scheme last year, expressed sadness that only 214 Nigerians pay tax above N20 million or more each year with all of them based in Lagos. So naturally, recent deadline extension approved by President Muhamadu Buhari is already engendering full compliance by tax-payer, especially going by figures from the Executive Chairman of Federal Inland Revenue Service (FIRS), Mr Babatunde Fowler on the level of compliance before the March 31 deadline.
The FIRS boss, who is thrilled by the success and impressive returns from VAIDS, said a total of N20 billion has so far been realised from 262 tax payers that have declared their assets under the Scheme.
Throwing their weight behind VAIDS, the Chartered Institute of Taxation of Nigeria (CITN) said increased sensitisation will address the huge financial leakages in the country and promised to constantly address tax issues as they affect the Nigerian environment.
According to CITN’s President and Chairman of Council, Cyril Ede, the Scheme will effectively check poor response to taxation and illegal financial flows in the polity, just as he maintained that compliance will deepen the initiative and generate more revenue for government.
In the same vein, former CITN President, Prof. Olateju Somorin said VAIDS would be instrumental to government’s global initiative of tackling leakages, which have contributed to Nigeria’s underdevelopment just as the Managing Director APT Securities and Funds Limited, Malam Garba Kurfi described VAIDS as the needed vehicle to improve the tax revenue that is lacking in the country.
Kurfi added that non-payment of taxes by many individuals and corporate bodies has made Nigeria’s revenue collection to GDP lower than eight per cent, compared to countries like South Africa at 20 per cent and most advanced economies at more than 25 per cent.
The APT Securities boss said with funds available, government will ably tackle issues of security, health care and education that are required for improved living standards among the citizenry. He said VAIDS presents the most viable option to track tax defaulters, who will readily come out to declare their assets because of the tax relief.
Kurfi, who said other countries have adopted the scheme and it worked for them, maintained that Nigeria will not be an exception, proposed that likely sanctions for default should include confiscation of assets, jail term for offenders, ban from politics or electoral context for a reasonable period of time.
“Also, the defaulters should not be given political appointment or Government contracts. Individuals should be compelled to show tax compliance certificate before getting any political appointment; being issued with clearance for government jobs; or renewal business registration among others” he said.
A financial analyst, Mr Ifeanyi Okolo, who also expressed his views on VAIDS, said the deadline extension should serve as the last warning to Nigerians, stressing that under the scheme, there should be no sacred cows and no one should be too big or too small to do the right thing.
Okolo said the nation’s tax authorities must focus on ensuring individuals and corporate bodies pay appropriate taxes from earned income if the government is serious with effective implementation of the tax amnesty regime, sying that besides ensuring individuals and companies pay their taxes appropriately, there should be effective monitoring to ensure proper remittance of taxes after collection.
Though the euphoria about the aptness of VAIDS may last for a while, government cannot ignore stakeholders’ opinion that if taxes collected are not remitted to the treasury, the scheme may just join the growing list of failed initiatives by previous administration.
Most importantly, government must keep its word of investigation and criminal prosecution of those that refuse to take advantage of the extended deadline of June 30 with the sanctions on defaulters being harsh enough to serve as deterrent to others.
In addition, the VAIDS enthusiasm demands more work by government in integrating its system for effective monitoring of tax evaders. A situation where by tax certificate is required before obtaining one’s driving licence, national identity card or business registration licence would make the system more robust and foolproof.