A seismic change began in the country’s tax system on 29 June, when an Executive Order signed by Vice President Yemi Osinbajo (then Acting President) gave life to the Voluntary Assets and Income Declaration Scheme (VAIDS). The scheme provides a platform for tax defaulters to regularize their tax statuses
As expressed in the policy, VAIDS, an initiative of the Federal Ministry of Finance in collaboration with federal and state tax authorities, was conceived to rectify almost all anomalies and issues of defective orientation to taxation in Nigeria. It also reflects the Federal Government’s desire to widen the tax net while offering certain benefits to tax defaulters, who voluntarily declare their assets and pay their tax liabilities.
Benefits accruable to entities, who voluntarily declare their assets and income, include immunity from prosecution for tax offences and tax audit and a waiver of the interest and penalties. They also include the option of spreading payment of outstanding liabilities over a maximum period of three years as may be agreed with the relevant tax authority.
“The Voluntary Asset and Income Declaration Scheme is specifically targeted at taxpayers, who have not been fully declaring their taxable income/assets; have not been paying the tax due at all; have been underpaying or under remitting; are under a process of tax audits or investigations with the relevant tax authority; are engaged in tax disputes with the relevant tax authority, but are prepared to settle the tax dispute out of court; are new taxpayers who are yet to register with the tax authorities; and are existing registered taxpayers who have new disclosures to make,” explained Finance Minister, Mrs. Kemi Adeosun.
She explained that it does not matter whether the tax default arose from undeclared assets within or outside the country, saying VAIDS provides a once in a lifetime opportunity to declare outstanding taxes and resolve such for good.
Voluntary compliance under VAIDS, however, does invalidate accrued interests or penalties already imposed by a court order on a tax defaulter.
The Executive Order that gave life to VAIDS, as widely agreed by experts, is a far-reaching regulation and applies to all tax entities and country’s extant tax laws. This, therefore, implies that individuals and corporate entities, who earned income but have failed to register, registered but defaulted or underpaid their taxes to the federal and state governments, can take advantage of the scheme.
The idea of tax amnesty was proposed by the Organization for Economic Cooperation and Development (OECD) in 2010. Since it was proposed seven years ago, over 47 countries across the world have implemented the variants of the programme. They include South Africa, India, Indonesia and Turkey.
VAIDS offers a time-limited opportunity to taxpayers to regularize their tax status relating to past periods, in terms of registration, filing of returns, assessment and payment of all taxes due. Thus, the scheme offerscompanies and entrepreneurs, whose tax affairs are out of joint, a window to make amends between 1 July 2017 to 31 March 2018.
While the window remains open, taxpayers will have the opportunity to voluntarily declare all previously undisclosed assets and income, thereby straightening out their tax affairs over a period of three years.
VAIDS applies to all tax-paying individuals, companies, executors and trusts and covers all taxes collectible by federal and state tax authorities. These include Company Income Tax (CIT), Personal Income Tax (PIT), Capital Gains Tax (CGT), Value Added Tax (VAT) and stamp duty.
Through VAIDS, the Federal Government desires to raise the percentage of non-oil tax revenue from the current 6 per cent to 15 per cent by 2020, improve tax collection and encourage voluntary tax compliance. The country expects to earn $1 billion from the implementation of VAIDS. In addition to raising revenue, VAIDS will boost investment and economic activities and create job opportunities, including 7,500 employment places for tax liaison officers by at the Federal Ministry of Finance, under the N-Power Scheme.
The community tax liaison officers, some of whom are already in training, will educate on and sensitize Nigerians to the importance of paying tax and the country’s tax system.
Tax education and enlightenment has also received a huge boost with the VAIDS TaxThursday initiative, under which the Federal Government has declared every Thursday from 29 June 2017 as a day for tax awareness and to welcome new taxpayers.
Experts believe that VAIDS provides the perfect opportunity for individuals and corporate bodies, who have previously under-declared or failed to declare their assets and income, thereby awakening the tax culture and widening the base in line with global initiatives designed to tackle illicit financial flows and tax evasion.
Chief Cyril Ede, President, Chartered Institute of Taxation (CITN), described the scheme as a laudable one. According to him, the decision of the Federal Inland Revenue Service (FIRS) to commence the implementation of the Standard Automatic Exchange of Information (AEOI) in Tax Matters from 1 January 2018 will greatly assist VAIDS. The implementation of the AEOI Standard, explained Chief Ede, will enable the FIRS receive information from tax authorities in other countries where Nigerians own assets on an annual basis. This will be possible without sending a specific request.
The information received, he further explained, could be used to implement measures against tax evasion.
Information to be shared, he noted, will include specific details on the assets, dates of acquisition, sources of funds through which such acquisitions were made and tax returns and liabilities before and after the acquisition of such assets.
Many other experts also believe that diligent deployment of information obtained via the AEOI Standard will complement the VAIDS by assisting to uncover previously concealed assets and revenue sources.
Tax experts have equally pointed out that the agreement to share bank information, under Common Reporting Standard (CRS), with countries such as Argentina, Indonesia and Italy, which operate programmes similar to VAIDS, will help in tracking Nigeria’s taxes taken abroad.
In addition, said experts, the support VAIDS is enjoying from internal revenue agencies at the sub-national level under the Joint Tax Board (JTB) is crucial to its success.
“The new scheme will contribute immensely towards boosting their much-needed internally generated revenue. The collaboration between the FIRS and state governments to tackle the problem of lack of full disclosure of assets and income, non-filing of tax returns and tax evasion and avoidance is laudable,” Gbolagun Bamisaye, a chartered accountant.
However, in the event of refusal to take advantage offered by the amnesty period, defaulters will face consequences specified in Section 8 of the Executive Order.
These include the full payment of outstanding tax liability and criminal prosecution. And for businesses, which comply but fail to fully declare the extent of their tax liabilities, whatever sum is paid on the declared liabilities may be considered as part payment of the outstanding sum later discovered by the authorities.
“The VAIDS program is exactly what the Nigerian tax System needs at this time . Tax Amnesty programs have worked elsewhere and I believe it will also work in a Nigeria” Augustine Nwankwo an Abuja based tax practitioner said recently. ” Nigeria deserves VAIDS”