By Omodele Adigun and Isaac Anumihe
As Nigerians await the full implementation of the Federal Government’s Executive order on Voluntary Assets and Income Declaration scheme (VADs), expected to rake in a whopping N19 billion to the national treasury the disposition of corrupt tax officials, however, has raised doubts about the success of the initiatives.
The threat of compromise and corruption by government cannot be rule out as the World Bank, in its Enterprise Surveys-Nigeria (2014) stated that companies interacting with the Nigerian tax administration face high risks of corruption.
The report states: “One in four companies expect to be asked for a bribe, gift or facilitation payment when interacting with tax officials”.
Another report, the Global Corruption Barometer (GCB 2015) states that “over half of Nigerians consider the tax authorities to be corrupt.”
Similarly, report by the US Department of State; Investment Climate Statement(ICS) also slammed Nigerian tax officials when it states:
“Tax collection processes are non-transparent and tax evasion among businesses is widespread due to collusion between businesses, individuals, and tax officials “(ICS 2016).
Recall that the acting President Yemi Osinbajo had said, at the inauguration of VAIDs recently in Abuja, that the scheme was specially targeted at taxpayers who had not declared their taxable incomes and assets, as well as those who don’t pay at all, including those who had been underpaying or under remitting.
Osinbajo said the scheme would cover all federal and state taxes such as companies’ income tax, personal income tax, petroleum profit tax, capital gains tax, stamp duties and tertiary education tax.
“The scheme will be operated from July 1, 2017 to March 31, 2018. It will be supported by an executive order to offer a once in a life time opportunity to those in default to regularise their tax affairs.
“In exchange for full and honest declaration, tax evaders will receive immunity from prosecution, forgiveness of penalty and interest that is due on unpaid taxes.
“They will also get the full assurance that all information provided will remain confidential.
“In addition, participants in the scheme will not be selected for audit investigation for the period.
“We understand that some tax payers may have problems raising cash and for that reason, we have built in a system that will allow those owing to pay over a period of time.’’
According to the acting president, this is subject to conditions.
Osinbajo said that those who failed to take advantage of the nine months grace period would face criminal investigation and if found guilty may face up to five-years jail term.
He said that the government would immediately commence a nationwide sensitisation of Nigerians on the scheme and tax in general to ensure compliance.
“To this end, we have agreed that every Thursday starting from today, and for the next one year will be declared Tax Thursday.
“We expect the Federal Inland Revenue Service (FIRS) and every state government to organise sensitisation events that would raise awareness of the tax system to ensure massive enrollment of new tax payers.”
“We must enroll at least 4 million tax payers and increase the level of payment among the 14 million already registered tax payers.
“We expect that all state governors will personally lead this initiative and support the work of the 7,500 community tax liaison officers that would be employed shortly.’’
The acting president said that a high level team working with the Federal Ministry of Finance was set up 15 months ago to research on tax evasion and illicit financial flows.
He said the report of the team, which was tagged “Light House Project” searched various data bases such as banks, Corporate Affairs Commission, vehicle registration numbers and immigration to fish out tax evaders.
On the international front, Osinbajo said: “Nigeria is now a party to the automatic exchange of information which comes into effect in January, 2018.’’
“This means that Nigeria will automatically have all the information to successfully pursue tax evaders across the world.
“Specifically, we will have information on beneficial owners of assets held abroad, including those in tax havens,” he said.
Assessing the scheme, the President of the Chartered Institute of Taxation of Nigeria (CITN), Chief Cyril Ede, said VAIDS is a right step in the right direction as it has laudable intentions.
He added: “It also possesses the necessary ingredients for turning around the fortunes of the government through non-oil revenues so as to cater for the welfare of the citizens and overall development of the nation. The Institute lend its support to the Federal Government’s move towards awakening the tax culture and expand the tax base through the Executive Order signed by the Acting President of the Federal Republic of Nigeria on Thursday, 29 June, 2017. This order provides a legal framework for the Ministry of Finance to set up the Voluntary Assets and Income Declaration Scheme in collaboration with all 36 states of the federation. The primary purpose of the scheme is to bring more taxpayers into the tax net so as to enable them pay all outstanding taxes and the benefit to the tax payer is a waiver of interest and penalty as well as opportunity to instalmental payment up to a period of three (3) years. The scheme will run for a 9-month period commencing from 1 July 2017.”
On the unforseen challenges of the scheme, Mr Taiwo Oyedele, Managing Partner and Head of Tax & Regulatory Services, at Price Waterhouse Coopers (PWC), said the biggest challenge of the scheme is how to make stakeholders work together to achieve the set objective.
His words: “The biggest challenge is key stakeholders pulling in different directions especially the National Assembly or state governments
There is a proposed bill to grant amnesty for corrupt proceeds currently at the House of Representatives. The bill should be designed to complement the VAID scheme rather than be in conflict with it as this discourages people from participating in the tax scheme. The other big challenge is how to convince Nigerians that when they pay the tax it will not be stolen by politicians but I think there has been some progress in the fight against corruption to partly address this concern.”
On how to check the excesses of the tax officials,he said there is a structure in place to ensure transparency in terms of taxes collected under the scheme.
“The scheme will not be implemented by FIRS alone, it is in collaboration with all the 36 states internal revenue authorities. There is a structure in place to ensure transparency in terms of taxes collected under the scheme by relevant tax authorities and the utilization of the funds. Declarations made will be independently verified and validated against other sources of information.”.
To make the scheme work, Oyedele urged the Federal Government to muster the polical will necessary to implement the scheme:
“To prosecute and jail culprits requires more than the FIRS. The most important factor is political will by the Executive at the highest level both at the federal and state levels. In addition to this, the justice system must work effectively to ensure that fairness and quick dispensation of justice including appropriate sanctions for established violations in line with the law.”
In his view, another analyst, Mr Odilim Enwgbara, recommended that the tax authorities should be more aggressive in implementing the scheme. To do this, FIRS should employ over 20,000 staff.
“We must be aggressive. We don’t beg people to do what they are supposed to do. Nigerians should be able to take responsibility. They should pay tax at the right time without giving them the option to do it. It is their responsibility. It is the problem of the law we have in this country. We should create what I call tax police. We can employ over 20,000 young men and women. People can go online and start putting their names and income. All these checks and balances are steps to take to make people pay their taxes. The so-called wealthy men are not paying what they are supposed to pay.
“What we are saying in essence is that let this government be aggressive and make FIRS raise at least 10 per cent of our GDP from taxes. They would go round to make sure that every Nigerian has a tax code to pay their taxes. Also, the government should have a kind of electronic system of paying tax. Our taxes are being diverted today. The Chinese will always go to FIRS and say ‘look I am supposed to pay N1 billion, what of if I pay N150 million and give you tips?’ Nigerians are a funny set of people and they will collect bribe. If you are caught evading tax somebody should be made to forfeit all his assets and still go to jail. We must set up tax police to go to all local governments.
“Another thing is that government should be responsible and provide infrastructure. Nigerians construct roads. Nigerians get water for themselves and they provide security themselves. But if government does not collect tax, how do you expect government to fix infrastructure?
“For those government officials who do not pay taxes, we create Workers Bank of Nigeria where every government worker’s salary and income must go to. We will not open another account, be it internal or external. If you do that they will not evade tax because the agency will know how much your income is and tax you directly.”
But for Professor Badayi Sani of Bayero University, Kano, the Federal Government should have considered the cost implications of VAIDS before formulating it.
“How cost effective is it? Nigeria is very big. The population is very large. For you to enforce or to monitor the genuineness of people making self declaration of their assets and incomes of their property, you have to look at the capacity of FIRS in terms of manpower, in terms of technology, in terms of having access to every nook and cranny of the penetration of businesses in this country.
Now, if you compare the cost of monitoring and verifying the income and assets, what you may realize will be 50 per cent of the cost of that enforcement and monitoring. Mind you, if you continue monitoring and verifying, the system will fall halfway. So, the policy is haphazardly done. What they ought to do is to study the cost effectiveness of the policy.
Again, we don’t have the infrastructure and because of lack of infrastructure, people have apathy to pay tax. They believe that part of the tax revenue goes into personal pockets. That is why people cannot declare their real assets. They are not sure that if they declare their assets properly, the money will go to government and it will be used for the purpose it is meant.”