FG targets N365bn from taxation amnesty in 9 months

Recently, the federal government extended an olive branch to tax defaulters as a means to strengthen its tax regime to sustain the business of governance. The Acting President, Yemi Osinbajo, signed Executive Order No. 004 of 2017, to authorize federal and state governments to allow defaulting taxpayers to voluntarily declare their assets and income, pay due taxes and obtain some benefits in return. Our reporter analyses this initiative and what Nigeria stands to gain from this in the next nine months.

The order followed the formal launching of the Voluntary Asset and Income Declaration Scheme (VAIDS), which guarantees amnesty for voluntary tax defaulters for a period of 9 months - July 1 to March 30, 2018.

The country’s hopes to raise anything above $1 billion (about N365 billion based on N365/$) depends on compliance by Nigerians. A couple of countries - India, Turkey, South Africa and Indonesia - have done this; they raised between $7 to $15 billion.

Nigeria’s tax to GDP ratio is 6 per cent, one of the lowest in the world. Ghana is at 15.9 per cent. Most developed countries are at about 30 per cent. The Federal Inland Revenue Service (FIRS), the nation’s most important revenue agency, collected only N1.2 trillion in 2016.

A summary of collections indicated that only N299,802 billion was collected as Company Income Tax (CIT), which was a far cry from the expected N867 billion contained in the 2016 budget.

However, Value Added Tax (VAT) yielded N473,464 billion as against the budgeted N198 billion; while Annual Luxury Surcharge and Capital Gains Tax brought in N389,215; and N5,18 billion, respectively.

Education Tax generated N46,868,726,865.07; Foreign Travels Surcharge, N50,000; NITDEF N7.5 billion; Pay As You Earn (PAYE), N47,236 billion; Personal Income Tax, N632,690 billion; Pre-Operational Levy, N391 billion; Stamp Duties, N5.8 billion; and Withholding Tax, N320,849 billion.

Speaking on the launch of the tax amnesty programme, the Minister for Finance, Mrs Kemi Adeosun, said the country had embarked on a number of work over the last 15 months looking at tax compliance and found a massive tax evasion on a major scale. “A lot of people are not registered and many of those registered are not paying the right taxes,” she added.

Adeosun said: “We now have the data and we engaged a team of experts to begin to look through and what we found was that people’s lifestyles do not correlate with their tax returns. We looked at properties abroad, properties in high value areas, we looked at BVN and Forex records. We have seen people with five or six properties paying just N150,000 a year.”

According to a recent Thabo Mbeki report for the Economic Commission for Africa, it is estimated that over the last 50 years, Africa lost in excess of US$1 trillion in illicit financial outflows.

The panel further estimated that the continent loses annually over $50 billion through these illicit financial outflows.

Adeosun noted that technology is now making it possible to build accurate financial profile of Nigerians in addition to engaging the services of one of the world’s leading private investigation firm. “One of the sources we looked at were the Panama papers and Wikileaks’s and we did a lot of data mining and picked out Nigerian names. When you marry these assets with the value of tax been paid at home, you see the sense of unfairness,” she said.

Adeosun said many companies are paying minimum tax, shifting profit to other jurisdictions through transfer pricing to make sure that the country gets very small percentage of the money generated in Nigeria.

The evasion is not only happening at the elitist and corporate levels alone. Adeosun disclosed that at the lower level, the government also found massive tax evasion. “With only 14 million tax payers, of which 13.3 million are Pay As You Earn (P.A.Y.E) category, people that have their taxes deducted at source. But if you look at the structure of our economy, majority of the people either run their own business or work for themselves. So they are not in the net at the high end and the low end and we will correct both at the same time.”

With the executive order, these individuals or corporate tax payers have a window of opportunity to restate their tax returns. Normally, when you restate your tax returns, you should pay penalties of 10 per cent and interest of up to 21 per cent per annum. However, all of these are waved if they declare fully and honestly.

The executive order is coming at a time that the country is getting the cooperation of the British, American and UAE governments on assets owned by Nigerians abroad. “The Canadians in fact, came to us and said you haven’t looked at us, we have a lot of your citizens who own properties in our country,” Adeosun added.

Another development that is giving steam to the government’s drive is the Global Forum on Transparency and Information Exchange for Tax Purposes which has offered its platform to the Nigerian authorities to take the lead in joining the Automatic Exchange of Information (AEOI) initiative to aid its fight against illicit funds transfer and low tax remittances.

The deputy president of the forum, Donald Godfrey, at a 3-day automatic exchange of information foundation course for select African countries in Lagos recently there have been calls for tax administrations to work together to ensure that taxpayers pay the right amount of tax to the right jurisdiction.

The Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler had said each African country needs to maximize its revenue through taxation and the only way of doing that is when they exchange information.