There is currently a global initiative to tackle the problem of illicit financial flows and tax evasion, which has contributed to the country’s underdevelopment. A report by former South African Premier, Thabo Mbeki, noted that the amount of illicit financial flows out of Africa exceeded the amount of development aid that Africa receives. Nigeria has the highest level of illicit financial flows in Africa.
On 16 August, 2016 the Federal Executive Council approved Nigeria’s participation in the country-by-country reporting standard. This will provide tax authorities with greater transparency into the scale of multinational company operations, and enable increased detection of profit shifting and other tax evasion strategies. In addition, Nigeria signed up for the establishment of the Beneficial Ownership Register at the Anti-Corruption Summit in London in 2016. The development will give Nigeria access to the true owners of properties in the UK and other participating countries.
As part of the global support to rebuild Nigeria under President Muhammadu Buhari, the government has secured the co-operation of a number of nation states in its quest to repatriate funds due to it. Nigeria has also signed agreements with a number of nations, which provide for the Automatic Exchange of Information (AEI) as earlier stated. These agreements allow the exchange of information between tax authorities of different countries who are party to this agreement accounts and investments to help stop evasion. Countries who are party to this agreement include Switzerland, Panama, the Bahamas and other tax havens. Additionally, banking information will easily be shared across countries due to newly implemented Common Reporting Standards (CRS).
With the effort by both Federal and States government in providing sources to increase tax awareness and compliance, as well as grant tax payers a time-limited opportunity to regularise their tax status without penalty, the Federal Government has recently implemented a new programme called Voluntary Assets and Income Declaration Scheme (VAIDS), which would concentrate on the national duty of all Nigerian companies and citizens to pay their taxes, wherever their income is earned, wherever they reside and no matter how rich they are.
VAIDS is a time-limited opportunity for taxpayers to regularize their tax status relating to previous tax periods. In exchange for fully and honestly declaring previously undisclosed assets and income, tax payers will benefit from forgiveness of overdue interest and penalties, and the assurance that they will not face criminal prosecution for tax offences or be subjected to tax investigations. As such, VAIDS ushers in an opportunity to increase the nation’s general tax awareness and compliance.
Nigeria’s Acting President, Professor Yemi Osinbajo, has signed an executive order to boost tax revenue through the Voluntary Assets and Income Declaration Scheme (VAIDS) which kicked off on Thursday 29 June, 2017, at the Banquet Hall of the Presidential Villa, Abuja. The scheme will run from July 1 this year to March 31, 2018.
Speaking at the event, Professor Osinbajo said that out of an estimated number of 69.9 million Nigerians engaged in economic activities; only about 14 million people pay tax in the country. He said Nigeria’s tax system, which is based on global best practice, is progressive with the highest income levels bearing the greatest tax burden.
Prof. Osinbajo said tax payers that comply with the scheme before its expiration date would derive some benefits.
“In exchange for full and honesty declaration, tax payers will receive immunity from prosecution, forgiveness of penalty and interest due on unpaid taxes, and the full assurance that information provided will be confidential,” he said.
In the words of the Minister of Finance, Mrs. Kemi Adeosun, she described it as a 9-month Tax Amnesty scheme. It allows Nigeria to expose both individuals and companies to regularize their tax affairs. “We have done quite a lot of work over the last 15 months looking at tax compliance in Nigeria. Our tax to GDP ratio is 6% — one of the lowest in the world. Now Ghana is at 15.9%, most developed countries are at about 30%. So it’s really very fundamental: very few people are paying the right taxes.” She also added that “In January 2018, there is something called the Automatic Exchange of Information (AEI), which Nigeria is a party to, adding that we will automatically get access to information, from all tax havens, and from other countries, on Nigerians abroad. We already have quite a lot of information. The sources we looked at also included the Panama Papers, and WikiLeaks. We did a lot of data mining, picked up Nigerian names, and so we’ve built very accurate tax profiles of a number of people and it’s very clear that they are not paying the right taxes.”
The Chartered Institute of Taxation of Nigeria (CITN), in its observation, said the move towards awakening the tax culture and base is in line with global initiatives to tackle the problem of illicit financial flows and tax evasion that has contributed to Nigeria’s underdevelopment.
The Institute’s President/Chairman of Council, Chief Cyril Ede, said his organization supports the move, which involves the signing of agreements with a number of nations to provide Automatic Exchange of Information, I stressing that it was a welcome development.
The Chairman, FIRS, Mr. Babatunde Fowler, who led the campaign in Abuja, said the tax awareness programme would be taken to all the 36 states of the federation.
According to him, through the programme, the Federal Government is targeting to bring in four million new taxpayers into the tax net as well as increase the level of payment among the 14 million already registered taxpayers.
Abdulaziz M. Salisu
NYSC member, Wuye District, Abuja