TAX SERIES BY ENIOLA – SEASON 3
VOLUNTARY ASSET AND INCOME DECLARATION SCHEME (VAIDS)
Episode 1 – Redemption
When a Convict on the death row is granted pardon or when an Amputee is given new limbs and can walk again, the only thing that can follow, is overwhelming bliss, a feeling of redemption, a new beginning.
That is what VAIDS brings to the table – Redemption, from our Tax iniquities and a new Beginning of Tax compliance.
VAIDS is a scheme that the Federal Government affectionately created to give a last chance to erring Tax Payers to set their houses in order before unforgettable measures are taken against them. It can be likened to the calm before the Storm.
What VAIDS entails:
1. Free Will: VAIDS nurtures the Hope that you can live without being a Tax vagabond. The ‘V’ as in Voluntary is not silent. Without being forced, scammed or dragged, one must willingly declare one’s assets and multiple income sources in the prescribed manner.
2. Disclosure: Taxpayers are not magicians. So no hat tricks or folktales are welcome with VAIDS. The real, true and traceable state of one’s incomes and assets within and outside Nigeria must be totally disclosed to the Government.
3. VAIDS Net: The ones to whom VAIDS applies to are all individuals resident in Nigeria and companies operating in Nigeria who:
a. Earn income or own assets but who have not seen the Taxman in reality or even in their dreams. They must register with the requisite Tax authorities. Eg FIRS, LIRS etc;
b. Are registered with the Tax Authorities, earn income or own assets but haven’t declared any or all of their income and assets;
c. Have been underpaying Taxes or under remitting Taxes;
d. Are undergoing Tax Audit or investigations with the relevant Tax authority; or
e. Are involved in a Tax dispute with the relevant Tax Authority but are undergoing reconciliation.
4. Timespan: VAIDS and the mercy it brings only goes back in time for 6 years. Any Tax iniquities for more than 6 years before VAIDS will not be forgiven. But generally, there is a tax limitation period of 6 years beyond which the relevant tax authority cannot assess a taxable person to additional Tax subject to where fraud or criminal evasion of Tax has been found to have been committed.
5. Benefits: The following benefits are for those who comply with VAIDS:
a. Exemption from Tax Audit;
b. No payment of interest on the Tax owed;
c. No prosecution for Tax offenses committed;
d. Waiver of Penalties – The strain of Distrain and other penalties will be eliminated;
e. Instalmental Payment: Father FG is really sweet. Not only do we get forgiven, we get goodies like stretching our default fees over a maximum period of 3 (three) years.
6. Confidentiality: It is promised by the FIRS that the various secrets unleashed by disclosure to the relevant Tax Authorities are guaranteed the utmost confidentiality except otherwise stated by statute.
7. Coverage: VAIDS applies to all taxes payable at all government levels e.g the Petroleum Profits Tax, Value Added Tax, Personal Income Tax, Companies Income Tax, Capital Gains Tax, etc.
Episode 2 – Why VAIDS?
Reasons why VAIDS exists include the following:
1. To Increase Tax Compliance: From time immemorial, people have always viewed the Taxman with barely restrained contempt. VAIDS is a strategic change of tactics that emphasizes on people voluntarily coming to the Taxman who is not only ready to forgive and forget, but who also bears goodies – like the instalmental payment package.
2. Tax Administration: Auditing and Tax Administration will be easier when Tax authorities are subject to accurate information and compliant tax payers.
3. To Increase Nigeria’s Tax to GDP Ratio: FIRS Chairman Babatunde Fowler has reportedly reiterated that Nigeria has no business with a 6% tax to GDP ratio. Ghana has 15.9% and South Africa 27%. VAIDS is set to increase that number to 15% by 2020.
4. Widen the National Tax base: By bringing more tax payers into the tax net, there is automatically more income and assets to be taxed and more revenue to government.
5. Reduce Dependence on Oil revenue: The unhealthy dependence on Oil money will be greatly eliminated. Government will be able to control the economy more effectively.
6. Better and Sustainable Revenue Source: Once people are brought voluntarily into the Tax net, they are likely to remain in it and create a sustainable revenue source for government.
7. Greatly reduce illegal financial flows and Tax Evasion: Since one doesn’t need to run from the government any longer, illegal financial flows should hold little appeal.
Episode 3 – Disregard of the VAIDS Redemption
The Federal Government has been gathering ammo from different agencies, entering into trans-border agreements, engaging international companies and utilizing various international conventions among other things for its formidable arsenal against those who disregard the VAIDS Redemption.
It is worthy to note that individuals and companies with extremely large incomes and multinational enterprises are the major targets of the FG.
The State Governments and authorities like the Federal Airport Authority of Nigeria, Federal Housing Authority, Petroleum Technology Development Fund, Nigerian Communications Commission Nigerian National Petroleum Corporation, Central Bank of Nigeria, Nigerian Customs Service, Assets Management Corporation of Nigeria, Office of the Accountant General, Nigeria Export-Import Bank among other sources have volunteered to share data required to identify tax defaulters at the expiration of VAIDS.
Data collected will be matched with that provided by the Federal Inland Revenue Service, Corporate Affairs Commission, Remita, Securities and Exchange Commission, Federal Road Safety Corps, Nigerian Civil Aviation Authority, Nigerian Financial Intelligence Unit and Government Integrated Financial Management System among others to identify tax defaulting companies and individuals.
On 17 August 2017, Nigeria signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) which allows automatic exchange of Country by Country Reports – CbCRs – in countries where a Multinational Entity is present and the Multilateral Competent Authority Agreement (MCAA) which gives Nigeria automatic exchange of tax and financial information among about 100 tax jurisdictions.
These will discourage illicit financial flows and tax evasion.
Federal Government ‘Project Lighthouse’ (PL) is a data mining project used to search out the hidden wealth of individuals for taxing purposes. The Federal Government will also implement the Automatic Exchange of Information Portal of the OECD which Nigeria is a party to.
Also relevant is the Unexplained Wealth Order which in the UK came into force on 31 January, 2018. If a Foreigner e.g a Nigerian owns a house in the UK and cannot prove how he legally got it and the source of income, the property will be forfeited.
In all, we can see that the Government is not smiling and it will be armed to the teeth in combating those who don’t walk the path of VAIDS redemption.
The following and many more accrue to defaulters:
1. Investigation by Subjection to Tax Audits
2. Criminal Prosecution
3. Distrain of Assets and Properties
4. Potential Closure of Companies
5. Name and Shame list publishing
6. Payment of penalties and interest owed
Episode 4 – The Litmus Test
VAIDS came into force on 1 July 2017 by an Executive Order of the Acting President, Professor Yemi Osinbajo and a Memorandum of Understanding signed between the Federal Government and State Governments. The VAIDS amnesty period was to end on 31 March 2018 but it has now been officially extended till 30 June 2018.
Winter is coming, June swiftly approaches. Do the combatants still thirst for war? Do the errant ones still continue evading and avoiding Tax? Will the government be viewed as a toothless bulldog and will the VAIDS redemption be tagged a sham?
It is undeniable that so far, VAIDS has greatly increased Tax Awareness among Nigerians. It has instilled a compulsion to ask certain questions and has stimulated discussions that were previously overlooked in the country.
For VAIDS to be even more successful, Government must put in place other measures that allow for a smooth running of the Tax system. Here the Tax Tripod – Tax Principles, Tax Laws and Tax Administration (please view TSE Season 1 for more info on the Tax Tripod) comes into play.
Implementation of our new National Tax Policy will revamp the major setbacks of our tax system. It will put an end to the vicious circle that results from flaws of the tax tripod and deal also with the low tax to GDP ratio, tax evasion and avoidance among other things.
Fairness, transparency and accountability must also be the watchword of the Government in implementing VAIDS as matters to be dealt with are sensitive or there will be an unsavory backlash towards the Government.
This must be extended to the Judiciary which would play a pivotal role when the suits start to pile. Its place as a transparent and independent arbiter must be uncontestable and Justice must be served ‘as e dey hot’.
Lastly, there is nothing quite like brand advocacy. When people see Celebrities, high net worth individuals and Corporations selling VAIDS market with evidence that they also have voluntarily declared, general morale will be on the high regarding VAIDS. It will definitely have a wider reach and a more interesting effect on concerned tax payers.
In light of the foregoing, I enjoin everyone reading to take on the persona of Science Students to hypothesize whether or not Government will pass the Litmus Test to deliver regarding VAIDS.
Gboremi Ogundipe is an alumna of the University of Lagos, and an aspirant to the Nigerian Bar, being a First Class Graduate of the Nigerian Law School .
Her key interests are in ADR, Corporate Commercial Law and International Law/Diplomacy.