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The curtains on compliance with the Voluntary Assets and Income Declaration Scheme (VAIDS) were to be officially drawn on March 31, 2018. However, the government in its wisdom or lack of it has extended the deadline to June 30, 2018 to enable many more recalcitrant tax defaulters comply. The VAIDS as a tax amnesty programme has been adjudged effective and successful. I guess the government is elated by the ‘high’ level of compliance by delinquent tax defaulters in Nigeria. But what is the level of success? When in 2013, the Canada Revenue Agency had a similar exercise, 15,133 cases were processed and the sum of $1.2billion was recovered. Many countries (both developed and developing) including many States in the USA, Greece, Italy, Ireland, Portugal, Argentina, Brazil, Spain and many many others have had their tax amnesty programmes and they had all been successful. Thank God we have also been able to replicate a policy successfully.
While the treasury is ‘stocked’ with the proceeds of the exercise, the question remains as to the lessons the government has learned and the experiences gained through the process. Has the government anything to take away other than the ‘spoils’ of the exercise? Is the government willing to replicate this feat in others areas of its operations in Nigeria? Does the government appreciate the reasons for the compliance with VAIDS? The questions are critical because the willingness of tax defaulters to cooperate with the government is a function of many variables. Had the variables necessary for voluntary tax compliance been in place, the question of VAIDS might not have arisen in the first place. VAIDS came and with the required commitment, conquered the tax ‘infidels.’ The story should not end there. It is important to ascertain the reasons for the compliance so that the government could leverage on them in the future to drive taxes and other activities cast in the same mold.
Though perceived as successful, the language of coercion which the government spoke in the case of VAIDS and which the people understood is instructive. There are better and more humane means of ensuring compliance with tax laws in enlightened societies. The factors aiding tax compliance could be addressed from two main perspectives- the economic perspective and the psychological perspective. The economic and the psychological perspectives operate differently under varying circumstances and conditions but with one overall objective in mind- maximizing revenue from taxation. In almost all cases, the economic perspective trumps the psychological perspective. The economists believe that the willingness of taxpayers to align themselves with tax laws is a function of the level of income, the tax rate, severity of fines in case of default and possible audit and investigation of taxpayers. When and where failures to comply with tax laws are observed, the government becomes authoritarian, thus resorting to blackmail and hyping terms such as fear of prosecution, ‘naming’ and ‘shaming’ tax defaulters. Of course, the strategy worked as tax defaulters rushed to fulfill their tax obligations. The psychologist, on the other hand, believes that tax compliance could be more effectively enhanced if factors such as adequate knowledge of tax laws by taxpayers; responsible and accountable attitude of government toward the proceeds of the tax, credible and ethical tax officials among others, are in place. If one may ask, how many taxpayers in Nigeria understand the tax laws and what efforts are being made to create adequate awareness? What can the average taxpayer do to ensure that the government ceases to be ‘allergic’ to accountability?
Coercion in terms of the threat of ‘persecution and shaming’ is potent in climes where there is low trust for government and its institutions. This is exemplified in the case of Nigeria where individuals are ‘stronger’ than the institutions they represent and wield an unsavoury level of power. There is a great need to create an enabling environment and build trust in institutions such that the activities of government could run on oiled-wheels as a matter of course. Such an environment would be more rewarding tax-wise than the VAIDS which I consider a one-off strategy on which we might not be able to successfully execute the second round. Because the VAIDS is built around coercion, it will not create taxpayers with strong values for cooperation.
Taxpayers would need to see tax matters not as burdens but as necessary civil obligations that should be voluntarily embraced with open hands. There is currently no critical stock of such taxpayers in Nigeria who anticipate shame and guilt in case of tax violation. The absence of such individuals is not because God has not created them but the Nigerian environment has not ‘made’ them. Most Nigerians have been molded not to feel shame and guilt and as such tax violation is a pastime. In the circumstance, VAIDS cannot and should not be taken as a long run answer to tax compliance but a short-term palliative. The first critical step toward building a community of voluntary taxpayers is to conduct annual taxpayer satisfaction survey. Such a survey will bring to light issues that would aid tax assessment and compliance at minimal cost. I believe the tax ‘delinquents’ are not as bad as the government asserts. There have to be humane and compelling specifics in our tax drive and the negative tax values will reverse. Be not afraid; do the needful.
Francis Iyoha
Professor Iyoha is of the Department of Accounting, Covenant University and Research Fellow, the Institute of Chartered Accountants of Nigeria (ICAN). He wrote viafoiyoha@ican.org.ng
