The Federal Government is to offer tax defaulters with huge (Tax) liabilities a period of three years to spread their tax payment under the Voluntary Assets and Income Declaration Scheme. This is one of the strategies of the government to ease the burden of such debtors by taking advantage of the new tax scheme to offset their debts.
The VAIDs programme offers a grace period from July 1, 2017 to March 31, 2018, for tax defaulters to voluntarily pay back to the Government what they owe. In exchange for full and honest declaration, the Government promises to waive penalties that should have been levied and the interest that should have been paid on overdue tax. Also, those who declare their tax obligation honestly would not be subjected to any investigation or tax audit after the nine month grace period.
Nigeria has one of the lowest tax compliance rates in the world with a tax-to-Gross Domestic Product ratio currently standing at six per cent.
Top Government officials involved in the implementation of VAIDS confided in our correspondent that those who failed to take advantage of the scheme and later found to have under-declared their income or assets would be treated as wilful tax evaders and made to face the full force of the law.
The official said apart from prosecution, the Government had agreed to allow taxpayers with huge tax debts to enter into arrangements to pay outstanding tax liabilities in instalments.
This, according to the source, who spoke on condition of anonymity as he was not officially permitted to talk on the matter, is as a result of the fact that some of the tax defaulters may not have cash to immediately offset their huge tax liabilities.
However, he said while these categories of tax defaulters might be allowed to settle their tax obligations in instalments, they would be required to pay interest on the outstanding balance.
The Ministry of Finance had in May this year approved a new interest rate on unpaid taxes, which it pegged at five per cent over the Central Bank of Nigeria’s Minimum Rediscount Rate for 2017.
The CBN’s Monetary Policy Rate currently stands at 14 per cent, thus implying that with the five per cent spread, tax defaulters will now have to pay an interest rate of 19 per cent on tax debts.
The official said, “Even though ignorance of the law is not an excuse, the Government has decided to take the pragmatic approach of offering an amnesty window to allow Nigerians, who may have evaded tax, whether ignorantly or deliberately, the opportunity to do their civic duty and pay the correct taxes whilst providing the much needed revenue for Nigeria’s infrastructure.
“The Federal Government appreciates that many defaulters have assets but may not have cash. Therefore, taxpayers will be allowed to enter into arrangements to pay outstanding tax liabilities in instalments.
“Taxpayers may, at the discretion of the relevant Authority, be granted up to three years to pay their liability, but will be obliged to pay interest on the outstanding balance.”
The official said through the scheme, taxpayers would be able to transfer assets that they had previously held by nominees into their own name. “It should be remembered that many Nigerians have lost assets in the course of trying to conceal them from the authorities.
“Such losses typically occur in the event of death or an urgent need to liquidate assets when required documentation and proof of ownership cannot be provided,” he added.
The Minister of Finance, Mrs. Kemi Adeosun, on Tuesday challenged stockbrokers to assist the Government to identify those who have huge Investments in securities but are not paying the correct taxes.
She said, “We recently launched the VAIDS scheme and those of you who are privileged to see the forms would notice there is a huge section on investment such as mutual funds, shares and other investments, which we are expecting patriotic Nigerians to voluntarily declare and pay the taxes and arrange to pay any taxes they have not paid on the acquisition of those assets.
“We have only 214 Nigerians paying taxes of N20m and above and you as stockbrokers have a role because you are the transaction managers, and brokers of many of these transactions, and many of these complex tax shelters you help to set up.”