Nigerian government moves to improve revenue generated through taxation by introducing a new policy called voluntary assets and income declaration scheme

|  By Anayo Ezugwu  |  Jul 17, 2017 @ 01:00 GMT  |

FOLLOWING the fall in oil revenue, rising budget deficit and debt servicing cost, the Nigerian government has introduced a new tax policy to shore up its revenue to meet its financial obligations. Acting President, Yemi Osinbajo, on Thursday, June 29, launched the Voluntary Assets and Income Declaration Scheme, VAIDS. The scheme is designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities. The new policy became operational from July 1, and will last for nine months.

Osinbajo, who signed an executive order on the VAIDS, said the federal government plans to use it to increase tax awareness and compliance, and grant taxpayers a time-limited opportunity to regularise their tax status without penalty, adding  that it became inevitable for the government to do something about the low level of tax compliance.

According to him, people feel indifferent about corruption in the public service because they see it as government money since they do not pay taxes. “When people pay taxes, they pay more attention to what government is doing. There’s a greater level of political and social consciousness. Taxes are not only about boosting government revenues. When people pay taxes, they hold the government to account more.”

The acting president assured Nigerians that the proceeds of VAIDs would not disappear, as they will be applied transparently and invested in key infrastructure projects and other services for the overall benefit of Nigeria and Nigerians. He said the funds raised will enable the government reduce borrowing and invest in vital infrastructure to spur development.

Similarly, Kemi Adeosun, minister of finance,  told Channels Television Monday, July 3, that after 15 months of hard work, the government discovered that there was massive tax evasion in the country. The minister said many of those registered were not paying the right taxes. “I have not set a specific target because it is very difficult, anything over $1 billion would be great but let me just give you some context. Some countries have raised between $7 billion to $15 billion, it really just depends on how much compliance we get from Nigerians, and it is not just high net worth Nigerians incidentally that are our target but companies. “We found out that a lot of companies are evading taxes, paying minimum tax and shifting profits to other jurisdiction to make sure Nigeria gets a small percentage of the money generated in Nigeria. Even at the lower level we are finding massive tax evasion. We have only 14 million tax payers in Nigeria and the majority of them are PAYE (pay as you earn) that is people who have their tax deducted at source,” she said.

Taiwo Oyedele, partner, West Africa tax leader, PricewaterhouseCoopers, PwC, told Realnews that VAIDS would definitely improve the tax revenue in the country. According to him, Nigeria is one of the nations with the lowest percentage of people paying tax in Africa. “This scheme will improve the percentage of taxpayers in Nigeria. We have only 14 million people nationwide that are registered with the FIRS and SIRS. The work force is about 80 million. The gap is too wide. We may not be able to get 100 percent but different countries even in Africa have 80 to 90 percent in their tax net. So people cannot be outside of the tax net and expect government to perform magic. We know that there are issues with corruption and government being unfaithful but that is not the only problem. There is also problem of revenue not coming-in in the first place.”

He said the VAIDS would not solve the problem of multiple taxation but only to ask people to pay the existing taxes. Oyedele said the issue of multiple taxation first and foremost had to do with the law and fiscal federalism, where different levels of government have the powers constitutionally to impose some taxes. He lamented that many government officials exercise this power irresponsibly by introducing new taxes. “The issue of multiple taxation is being addressed separately. This scheme is like a tax amnesty. It is not there to solve multiple taxation problem but just to say to people, you are supposed to pay personal income tax, you have not paid? You are supposed to VAT, you have not paid? Come and pay now, I will forgive you penalty and interest and I will not persecute you. So that is more like essence of this scheme,” he said.

According to the National Bureau of Statistics, NBS, Nigeria has a taxable class of no fewer than 69 million people, regrettably only 14 million are currently in the tax net. And only 214 of taxpayers, irrespective of status, pay N20 million or more annually, while about 900 taxpayers pay N10 million per annum. The 214 taxpayers are based in Lagos, while only two out of the 900 individuals are based outside Lagos.

The scheme would be implemented by the Federal Inland Revenue Service, FIRS, in collaboration with all 36 State Internal Revenue Service and the FCT IRS. its main objective is to increase the number of taxpayers in the tax net and raise revenue. Specifically, the scheme is designed to increase Nigeria’s tax to GDP ratio from the current 6 percent to between 10 percent and 15 percent; broaden the national tax base; curb non-compliance with existing tax laws and discourage illicit financial flows and tax evasion.