The Nigerian Voluntary Asset and Income Declaration Scheme (VAIDS) which is expected to last for nine months after its take-off on July 1, 2017 will end on March 31, 2018.
The Scheme which is a nine-month tax amnesty given to every Nigerian especially the high net worth individuals (HNIs) covers the whole array of taxes and gives Nigerians the opportunity to regularize their tax affairs.
VAIDS enables taxable Nigerians to declare their assets and incomes and get certain waivers, including penalties and interest payments.
In addition to data mining and matching between government departments and agencies, the Federal Government has employed a US household name in asset recovery to link land registry records and tax receipts.
Other areas of interest to the authorities include bureaux de change records, the whistle-blowing scheme, data held at the Corporate Affairs Commission (CAC), Wikileaks, the ‘Panama papers’, the registration of private jets and yachts, and bank verification numbers.
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.
In line with Federal Government of Nigeria’s ambitious plans 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.
Currently, those taking advantage of VAIDS by declaring honestly and fully are being freed from prosecution even as they qualify for the pardon for penalties and interest.
Another benefit of participating in the Scheme is that tax payers are allowed to transfer assets previously held by their nominees into their own name.
As the deadline for the Scheme approaches, and no renewal or extension of the period upon expiration, it implies that remaining tax defaulters who fail to take advantage of the Scheme will face the full force of the law. Tax evasion is a crime punishable upon conviction by imprisonment of up to 5 years.
There are indications that banks are fine-tuning the processes that will enable them to submit the required data to the tax authorities.
This newest move is in line with the Federal Government directive that banks should release information on the income and assets of their customers, especially those of over 12,000 high net worth individuals, who are either not paying taxes or have been underpaying.
The Federal Ministry of Finance said that there are only 14 million taxpayers in Nigeria of which 13.4 million have their taxes deducted at source. Those said to be paying some tax voluntarily represent less than 1percent of the economically active population. At its launch, VAIDS had a target to raise at least $1billion equivalent.
On VAIDS expiration, the taxpayer will still be required to pay the tax due along with the associated interest and penalties.
Typically, a penalty of 10percent of the tax due is assessed, along with related interest charges that accrue at 21percent per annum, commencing from the due date of the related tax charge. In some cases, the penalty assessed is 100percent of the tax due and further, the related assets are liable to be forfeited.
“A successful follow-up by the authorities after the deadline requires the full cooperation of the judicial system. Another challenge for the authorities is to convince the working population that the amnesty is really an once-in-a-lifetime opportunity. The experience from Turkey, Indonesia and elsewhere is that such programmes are repeated and gradually their edge in consequence”, said Gregory Kronsten-led team of research analysts at FBNQuest.
The Automatic Exchange of Tax Information (AETI) has garnered significant international momentum as a growing number of tax authorities around the world seek to facilitate free flow of information among states.
The latest in this line are European Union tax authorities who have gained the right to access data collected by other states under anti-money laundering legislation, following the entry into force of new rules on January 1.
Under the Directive on Administrative Cooperation, authorities with anti-money laundering responsibilities in any EU member state will be required to automatically share certain information.
Pierre Moscovici, EU Tax Commissioner said “We want to give tax authorities crucial information on the individuals behind any company or trust. This is essential for them to be able to identify and clamp down on tax evaders. To do this, tax authorities will now have access to anti-money laundering information.”
Iheanyi Nwachukwu & Stephen Onyekwelu
