With just 38 days to deadline, many taxpayers in Nigerians should be considering the reputational risks they could face in future for not leveraging current window of opportunity which Voluntary Assets and Income Declaration Scheme (VAIDS) created.
On July 1, 2017, the Federal Government of Nigeria launched the Voluntary Asset and Income Declaration Scheme, which grants a nine-month amnesty period to all tax defaulters to voluntarily declare their assets and income within and outside Nigeria.
Government’s plans post-deadline (March 31) remains unclear, but it is nice to showcase the penalties for non-compliance. The penalties include: liability to pay in full, the principal sum due, all interest and penalties due (10-100percent of the tax due or forfeiture of related asset); and criminal prosecution in accordance with relevant extant laws, including up to 5 years in jail.
Other penalties facing tax defaulters include withdrawal of any reliefs, which may have been granted to the participant; liability to undergo comprehensive tax audit; and relating to undisclosed information, any sum voluntarily declared may be counted as part payment of outstanding tax.
The Scheme is aimed at ascertaining their outstanding tax liability for payment or making them face criminal prosecution at the expiration of the grace period. The Federal Government has vowed not to extend the deadline.
As the deadline fast approaches, United Capital analysts who recently looked at the benefits and penalties of non-compliance said, “We advise clients to avoid any reputational risks that may arise thereafter”.
The advantages of the Scheme include: freedom from prosecution for tax offences; waiver of applicable penalties and interest due (at 21percent per annum); the option of spreading the payment over a 3-year period subject to agreement with the Federal Inland Revenue Service (FIRS); and transfer of assets previously held by nominees into their own name.
In line with Federal Government of Nigeria’s ambitious plans to increase spend on infrastructure development, the Federal Inland Revenue Service (FIRS) and the tax authorities of the 36 states under Joint Tax Board (JTB) launched the Voluntary Assets and Income Declaration Scheme (VAIDS) in June.
To help their clients navigate way through the process, United Capital Research Daily insight has been focusing on key provisions of the Scheme, while further creating awareness on the importance of adherence to the provisions of VAIDS.
Nigeria’s tax-to-Gross Domestic Product (GDP) ratio at just 6percent is one of the lowest in the world compared to India (16percent), Ghana (15.9percent), and South Africa (27percent). Most developed nations have tax-to-GDP ratios of between 32percent and 35percent.
The Scheme provides a one-time opportunity for defaulters to regularize their tax status relating to previous tax periods; pay all outstanding taxes and prevent/stop tax evasion.
Iheanyi Nwachukwu
