The Federal Government launched the Voluntary Asset and Income Declaration Scheme (VAIDS) on June 29, 2017 to address the problem of low tax compliance in the country and to generate the much-needed revenue for public expenditure.
Taxation is generally considered a fair means of wealth redistribution as high net worth individuals pay higher than low-income earners. VAIDS provides a one-off opportunity for evaders to avoid the wrath of the law. Between July 1 and December 31, 2017, evaders were encouraged to regularise their tax status in exchange for immunity from prosecution, tax audit and be absolved from penalty charges and interest.
Evaders who delayed participation beyond December 31, 2017 were projected to pay interest on overdue tax balances. Those willing to participate could enter into an arrangement to pay in instalments of several tranches. The Minister of Finance, Mrs. Kemi Adeosun, explaining the scheme, noted that the behaviour of some of the nation’s richest citizens and multinationals operating in Nigeria, who seemed to consider paying tax to be optional, could no longer be tolerated.
No hiding place
The Federal Government has, meanwhile, signed data exchange agreements with several countries including the United States (US), the United Kingdom (UK), Canada, United Arab Emirates (UAE), Switzerland, Mauritius, Panama and Bahamas. These are some of the countries that some wealthy Nigerians are said to have both cash and houses hidden. Under the agreements, there is an exchange of banking information on cash and assets such as landed properties owned by Nigerians in those countries.
This strategy has created a “no hiding place” challenge for tax evaders residing in Nigeria or abroad. The Federal Government has also put in place a data mining mechanism to fish them out. It is expected that at least US$1 Billion (about N360 Billion) could be raised from the scheme which will reduce Nigeria’s borrowing needs, allow investment in vital infrastructure and spur development.
Speaking at its launch, the Minister of Finance, had said, “During the last eight years, Nigeria has failed to reduce its debt levels despite high oil prices and nominal GDP growth. We have inherited a situation where our debt and underdevelopment is getting worse, not better. This cannot continue. “Neither can the behaviour of some of our richest citizens and multinationals operating in Nigeria – who seem to consider paying tax to be optional. From 2018, international law will make it easier than ever to track these evaders down and punish them.
“This scheme is in line with similar initiatives launched in 2016 in India, Indonesia and South Africa. We know they work, we know it’s the right thing to do and the Treasury desperately needs the money.” In a recent address, Mrs. Adeosun said, “The unique cooperation between the various arms of the Federal Government and Foreign Governments has provided an unprecedented level of data that allows the Nigerian Government to profile taxpayers accurately and identify those whose lifestyle and assets are not consistent with their declared income.
Looming prosecution/severe punishment
Those who ignore VAIDS risk criminal prosecution as from July 1, 2018. Severe punishment is planned for tax evaders at the end of the amnesty period as they face imprisonment of up to five years, severe extra penalties – up to 100% of the outstanding tax due – compound interest at 21% per annum as well as forfeiture of assets Mrs. Adeosun told journalists, penultimate Friday, that Government officials had been working assiduously, preparing cases against tax evaders which would begin in July.