BY 31 March, the nine-month window provided by the Voluntary Assets and Income Declaration Scheme (VAIDS) for tax defaulters to regularize their tax affairs will close. From the look of things, the closure will be accompanied by a big bang. I await the VAIDS deadline day like a cup final.
The Federal Ministry of Finance, initiator of the scheme, has stated that it will name and shame defaulters, who fail to take advantage of the scheme when the window shuts. That certainly will provide titillating headlines, with tax debtors, including high net-worth individuals wildly lauded as role models, being touted as cheaters of the system.
It is something I look forward to. This would be followed by using the law to ensure that penalties and interests on owed taxes are paid in addition to the tax debt as well as prosecution, all of which the government offers to waive for those who truthfully and voluntary declare under VAIDS. Mr. Babatunde Fowler, Chairman, Federal Inland Revenue Service (FIRS), in a recent interview, gave a bold hint of government’s readiness to confront those who refuse to take the opportunity offered by VAIDS.
“We increased the legal fees in our 2018 Budget,” the FIRS Chairman was quoted as saying. The implication is that the government has enough ammo for the offensive against tax avoiders. Interesting times loom, with the added benefit of seeing those fleecing the system in the dock.
It requires no great insight to know that, as a people, our tax compliance records are spectacularly squalid, with near-total dependence on oil revenues, which have thinned out as oil prices plunged on the international market. Our Tax-to-GDP ratio, at 6 per cent, remains one of the lowest in the world. Fellow African countries, including Ghana, have considerably higher ratios. We expect development, like in “saner climes”, without wanting to do what those in such climes do. We seem to consider willful tax avoidance a sport, an activity VAIDS was conceived to stop.
Officially, the number of taxpayers paying N10 million as tax per year, as at 2017, was 943. Of these, 941 were based in Lagos, with only two based in Ogun State. The implication of this is that in all the other states and the Federal Capital Territory, there is no billionaire or multi-millionaire.
That cannot be the case, given the assets scattered around the country and vehicles on our mostly decrepit roads. What it means is that many property owners in highbrow areas have not been paying or have been underpaying taxes.
I need to quickly own up that I thought the government was clowning when it came up with VAIDS. In our country, where even the most basic of data are difficult to come by, I wondered how the government would access financial and transaction data. No chance, I told myself in apparent ignorance of a changing world.
This is a world of Automatic Exchange of Information, which means countries which are signatories can ask one another for information about individuals and corporate entities that transact business with their respective jurisdictions. A number of countries have already volunteered to give Nigeria information on corporate organisations that own properties on their soil.
Even those skilled in hiding money and assets now look considerably less safe. Nigerians with properties in the United Kingdom (UK), for example, will find the Unexplained Wealth Order tough to beat. The law provides that that if you are a Briton or a foreigner, you have a house and you cannot show evidence of tax payment based on the income you used to acquire the house or cannot substantiate the source of your income, that property would confiscated.
Locally, VAIDS is using state land registries to know the owners of properties as well as the doing valuation of those assets. Data have also been mined from the Bank Verification Number, payment platforms, Nigeria Customs Service and the Corporate Affairs Commission among others.
A few weeks ago, Chairman of the Lagos Inland Revenue Service (LIRS), Mr. Ayodele Zubair, in an interview, said many individuals and corporate organisations have been approaching the agency for information on VAIDS. I find that encouraging and expect that those who have not taken that step should approach tax authorities relevant to their cases to make the move. There is still time to make a declaration.
There is more time, a maximum of three years, to spread payment of what is owed. The alternative is not as relaxed. Starting from naming and shaming, to payment of interests and penalties, exposure to tax audits and of course, court dates to face tax evasion charges.
VAIDS offers the country a huge chance to build a credible tax database and ensure a more sustainable and reliable revenue source for development.
Bickersteth, a public affairs analyst, writes from Zaria