Nigerians React On Compulsory Tax Initiative
The Federal Government on June 29, 2017 formally launched the Voluntary Assets and Income Declaration Scheme (VAIDS), an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities. As the window of opportunity for declaration draws near, OYENIRAN APATA, JUSTUS ADEJUMOH, MOHAMMED SHOSANYA , NKASIOBI OLUIKPE And ANDREW UTULU in this report provide an update and views of Nigerians on the initiative. Excerpts:
Mr. Tony Onyemaechi Elumelu, the Nigerian economist, entrepreneur and the Chairman of Heirs Holdings and the founder of The Tony Elumelu Foundation, recently observed that in spite of the multiple taxes and levies in the country, Nigeria remained the lowest in the world with 10 per cent tax contribution to Gross Domestic Product.
“It seems we have a big problem, because, with high taxation and multiple levies, it is expected we should have very high tax revenue,’’ he said.
According to him, the government should find out the reason for the discrepancy between desired growth and development.
Thus, On June 29, 2017 precisely, the Acting President, Prof. Yemi Osinbajo, formally launched the Voluntary Assets and Income Declaration Scheme (VAIDS), an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities.
It is obvious that times are hard and the government needs the buy-in of the citizens, via tax compliance, to boost its revenue. For Nigeria and its tax system, these are not just tough times but extra-ordinary times going by the key indicators from tax to GDP ratio, to non-oil revenue, budget deficit, debt servicing cost, internally generated revenue by states and so on.
Similarly, the poor tax revenue problem contributes to other macroeconomic challenges such as high-interest rate, poor sovereign credit rating, and even agitation for resource control among others.
Nigeria’s tax revenue profile that is presently at a crisis level thus required a turning point otherwise is bound for the tipping point with dire consequences.
This calls for an urgent, drastic and robust response by all stakeholders.
The convenient narrative is to say people don’t pay tax because the government is corrupt whereas in reality, and based on empirical evidence, the reason why the government is corrupt is partly that people don’t pay tax.
It has been indisputably established that when citizens pay their taxes correctly, they are more engaged and therefore hold their leaders accountable.
“So, we have a much bigger problem with tax than anything else. Here are some numbers, and as the saying goes “numbers don’t lie”.
“The revenue problems Nigeria is generally regarded as an “oil rich” nation and everything seems to centre on or around it including national budgets.
“This illusion of wealth means we are fixated on how to share our small national cake rather than focus on how to bake a bigger one. If the tax system had been working well, oil revenue should be miscellaneous income, not the main revenue”.
VAIDS So Far
In less than one year of its introduction, the Federal Government’ Voluntary Assets and Income Declaration Scheme (VAIDS) has presently created a most predictable income streams for the government.
The scheme, which was initiated by the Minister of Finance, Mrs. Kemi Adeosun, has a fixed time opportunity of March for taxpayers to normalise their tax status relating to previous tax periods.
However, as the window of opportunity draws to a close for tax defaulters to voluntarily and truthfully declare previously untaxed assets and incomes the government through the Federal Inland Revenue Service (FIRS) Executive Chairman, Babatunde Fowler has repeatedly warmed at various times that the deadline is sacrosanct to VIADS mandate.
According to reports, the reform initiative VIADS netted over N17 billion to the federation account, even as about $110 million is being awaited to be paid in any moment from now by two foreign firms desirous of regularising their tax status.
The Minister revealed that the Government had deployed data mining to compile data on thousands of taxpayers, which showed the level of non-compliance and tax evasion.
Citing BVN, land registry and other sources within Nigeria as well as data from foreign Governments, she also detailed the work of an international asset-tracing firm as a source of overseas data.
“Technology has been key in enabling us to build an accurate financial profile for Nigerians and based on the information we gathered, we saw that the level of non-compliance was very high and we knew we had to do something about it. In the past, tracking true income and assets would have been difficult but now, it is at the touch of a button”.
The Minister revealed that further information will automatically become available in 2018 under the Automatic Exchange of Information, to which Nigeria is a party. Nigeria will automatically get information from tax authorities of various countries.
“What VAIDS is doing is giving taxpayers, both companies and individuals, a window of opportunity to regularise, to come clean so to speak, to declare fully, to declare honestly. In exchange for the full and honest declaration, what we are assuring us is that we will waive penalties that should have been levied, waive the interest that should have been paid on overdue tax which is quite considerable, those who declare honestly will not be subject to any investigation or tax audit” she explained.
Establishment Of EU/PICA
In its drive to ensure the success of the initiative and control measures, Mrs. Adeosun established the Efficiency Unit (EU), to complement the EU, especially in the area of auditing, the Presidential Initiative on Continuous Audit (PICA) was also established as an integral part of government’s business by the Finance Minister.
The mandates of PICA include: validating controls, assessing risks, pruning personnel cost, ensuring compliance with public financial management reform, and detecting errors and making recommendations to management for necessary actions.
Adeosun noted that the establishment of PICA had become necessary in order to put systems and frameworks in place over finance and spending of government revenue.
Since its establishment, the Continuous Audit Team (CAT) had undertaken series of investigations and recoveries for the government, including infractions by the staff of Pension Transitional Arrangement Directorate (PTAD), recovery of salaries paid to ex-diplomats, verification of subsidy claims, personnel costs to Ministries, Departments and Agencies (MDAs), and ghost workers scammers.
CAT conducted investigations into infractions committed by some staff of Pension Transitional Arrangement Directorate (PTAD). This investigation led to disciplinary action against five top management staff of PTAD, including a former Director-General.
PICA, in the course of its investigation, discovered that 196 Foreign Service officers continued to receive salaries after exiting the Federal Service.
The sum of 192 million was collected by these officers as salaries even after leaving the service. The case was handed over to the Economic and Financial Crimes Commission (EFCC) for further investigation and recovery of the funds on completion of the investigation.