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The recent past has seen significant changes in the economic and political environment, particularly in which High Net-worth Individuals (HNIs) and their professional advisors operate in relation to information exchange in tax matters. Panama’s recent leak of confidential documents revealed how the wealthy and powerful in today’s world use tax havens to get around the law.
The Tax and Good Governance in Africa project recognizes that High Net-worth Individuals (HNWIs) pose significant challenges for governments due to the complexity of their affairs, the opportunity for offshore tax planning and the potential impact on revenue collection, and the impact of their compliance behaviour on the integrity of the tax system.
“High Networth Individuals transfer assets overseas. They use offshore companies in tax havens to secure assets and they register assets in nominee’s names”, a Nigerian-based tax expert told Tax Issues on phone.
He notes that tax havens are at the core of a global system that allows large corporations and wealthy individuals to avoid paying their fair share.
Recently, Raymond C. Offenheiser, president of Oxfam America noted that activities of large corporations and HNWIs deprive governments of the resources they need to provide vital public services and tackle rising inequality between the rich and poor.
In recognition of this anomaly in taxation, the Multi-Stakeholder Initiative on Tax and Good Governance in Africa will next month in Vienna, Austria look at the challenge High Net-Worth Individuals pose for tax administrations, financial intelligence units (FIUs) and Law Enforcement Agencies.
They will also deliberate on how to improve the effectiveness of financial investigations, prosecutions and imposition of sanctions in case of failure of voluntary compliance programmes for HNWIs.
As offshore financial centers are increasingly used to avoid taxes, broad representation of delegates from governments, international organizations, academia and business organizations will be looking at how to design effective voluntary compliance programmes for HNWIs.
This concluding conference of Tax and Good Governance in Africa project is hosted by the Institute for Austrian and International Tax Law at WU Vienna University of Economics and Business, organised in cooperation with the United Nations Office on Drugs and Crime and with the support of the World Bank Group.
Early last year, report commissioned by the Federal Inland Revenue Service (FIRS) and the Joint Tax Board (JTB) found that many super-rich Nigerians do not pay correct tax on their income.
Last year, (29th June, 2017), Nigeria launched the Voluntary Asset and Income Declaration Scheme (VAIDS). The Scheme, backed by an Executive Order is aimed at broadening the country’s tax base and offer incentive to tax evaders. With a nine-month period, commencing on 1st July, 2017 to March 31, 2018, the scheme provides for all categories of taxpayers who are in default of their tax liabilities to declare their assets and incomes from sources within and outside Nigeria relating to the preceding six (6) years of assessment.
Part of the obligations of the Scheme on taxpayers include: regularization of tax liabilities for all the relevant years, pay all outstanding taxes, prevent and stop tax evasion, and ensure full tax compliance.
International Monetary Fund (IMF) researchers estimated in July 2015 that profit shifting by multinational companies costs developing countries around $213 billion a year, almost two percent of their national income.
Tax Justice Network concluded in a 2012 report that “designing commercial tax abuse schemes and turning a blind eye upon suspicious transactions have become an inherent part of the work of bankers and accountants.
Iheanyi Nwachukwu
