Omodele Adigun
As the Federal Government mulls an extension of its tax amnesty programme, a prelude to the Voluntary Asset and Income Declaration Scheme (VAIDS), which officially came to a close last Saturday, one of the critical success factors of the scheme, going forward, is total demilitarisation of the scheme, according to a tax expert.
According to a former President of the Chartered Institute of Taxation of Nigeria (CITN), Mr. Ayodele Adigun, for the tax authority to woo people into the tax bracket, it should raise a minimum bar or thoroughfare without hump or bump that may spook taxpayers.
Adigun also canvassed six-month extension for widespread campaign in local languages to take root, make more people to buy in and turn voluntary compliance more seamless.
Hear him: “In order to bring a lot of people into the tax bracket, you need to set a very low hurdle or put no hurdle at all; make it easy for them to start complying. Once in the tax net, it will expand the tax base. Researches all over Africa show that about 60 per cent of the taxable persons are in the informal sector of the economy. You can’t wish away 60 per cent of the economy for tax purposes. If the 60 per cent are complying, you can imagine what will be the bottomline of tax receipts for the government.
“They should not make it look military-like; they should not militarise the scheme, but rather, there should be a campaign to show people that it is in their best interest to comply and it will carry every sanction thereafter.”
The Minister of Finance, Mrs. Kemi Adeosun had, at the weekend, raised hope of extension when she said that the Federal Government is currently considering the requests by states and the Organised Private Sector (OPS) for an extension of the tax amnesty programme, VAIDS.
The former CITN boss concurred with this, saying it is a good idea. “The three months some people are asking for is not bad, but it would have been better if it is six months to drum up more publicity to keep up the tempo and bring in more people. Honestly, the programme is good but it is wrongly timed. It is not the time of economic crisis that the government should introduce such programme. It should have worked well when the economy is stimulated. There is nothing wrong with people coming voluntarily into the tax net.
“They should make the forms available and let people know where they can obtain the forms. In fact, those whom VAIDS concerns most do not even have the forms. They only sent the forms to selected few. That shows that they are only targeting few members of the society. I believe these are the few people they know that are rich, either by virtue of such people holding positions in one organisation or another. But there are some people who are strictly private sector people; there are also some who are in the informal sector of the economy that, if properly approached, can key into the scheme.”
Giving the success of the programme so far, Adeosun said the ministry has found a new batch of 130,000 people who may have underpaid taxes over the years. This is aside tax receipts generated by the scheme.
Her words: “We have had very good responses from companies. So far, we have received $110 million from just two companies. One of them paid a liability of $55 million, while the other paid $44 million. Let me give you an example. We asked the Office of the Accountant General to send us the data of every payment over N100 million in the last five years. We then checked FIRS (Federal Inland Revenue Service) for the data on taxes they paid. These government contractors had declared less than the amount the government actually paid them. This does not even include their other income streams, which would have included the transactions they had done with the bank and personally. This was business with the government, yet they weren’t declaring their income aptly.”
Babatunde Fowler, the FIRS chairman, on his part, said VAIDS has generated N16.9 billion at the federal level alone as at the end of 2017.
VAIDS, which started last July with nine-month grace period, is a type of voluntary disclosure programme with the objective of giving a window to non-compliant taxpayers to regularise their tax position in form of registration, returns and remittance.
The scheme gives a once-in-a-life-time opportunity to taxpayers to fully and honestly declare all their assets and incomes from all sources, which had previously not been exposed to the tax authorities, and to pay the tax due on those assets and incomes.
Giving reasons why the Federal Government came up with the scheme, a VAIDS consultant, Mr. Niyi Adebayo, said the country’s tax-to-GDP ratio is about the lowest in the world. Nigeria’s tax to GDP ratio is just 6 per cent, while Ghana and South Africa are at 15 per cent and 24 per cent respectively.
Hear him: “Of 70 million economically active Nigerians, less that 10 per cent are on the Pay-As-You-Earn (PAYE) scheme and 96 per cent of this have their taxes deducted at source. Only 214 Nigerians pay N20 million or more in taxes annually, and all of them are based in Lagos. At 21 per cent PAYE, this implies that only 214 Nigerians earn above N95.238 million annually. Fewer than 1,000 pay N10 million or more in taxes, all but two are based in Lagos also. The numbers do not lie; people are not paying taxes.”
Adebayo blamed this low tax compliance level on the elusive harmonisation of data of corporate and person entities between various government agencies.
“There is a lack of an industry and agencywide intelligence on financial and economic activities of taxpayers and potential taxpayers, which has inhibited the efforts to drive an effective tax compliance regime. There are multiple silos of data sited in multiple data centres across the country under the stewardship of several Ministries, Departments and Agencies (MDAs). “Because of the lack of substantive collaboration, authenticity and integrity, accuracy of data cannot be properly achieved. However, with the current data harmonisation initiative sponsored by the Vice President’s office, we can see the spotlight, though far, but visible. NIMC has 24 million registered persons on its database, while it has received 9.3 million BVNs from NIBSS, of which there is a 40 per cent match to its existing records. NIMC has begun direct integration with several key data points like INEC, immigration, NCC etc.”
Adebayo added that this has led to the identification of potential taxpayers through assets and income; process the taxpayers’ information and issue a bill. “As a result of this, taxpayer has been normalised and becomes part of the tax paying society,” he said.