In a bid to boost non-oil revenue and ensure that every taxable individual and corporate citizen is captured in the tax net, Acting President Yemi Osinbajo Thursday signed an Executive Order to give bite to the Voluntary Asset and Income Declaration Scheme (VAIDS).
VAIDS outlines the federal government’s plan to increase tax awareness and compliance, and grant taxpayers a time-limited opportunity to regularise their tax status without penalty.
To be executed jointly by federal and state governments, VAIDS focuses on the national duty of all Nigerian companies and citizens to pay their taxes, wherever their income is earned, wherever they reside, and no matter how rich they are.
The Executive Order was signed by Osinbajo during the launch of VAIDS at the Conference Hall of the State House, Abuja.
Over 10 state governors, the Minister of Finance, Mrs. Kemi Adeosun, and other top government officials were in attendance.
In his address, Osinbajo said it had become inevitable for the government to do something about the low level of tax compliance.
According to him, people feel indifferent about corruption in the public service because they see it as government money since they do not pay taxes.
Osinbajo said: “When people pay taxes, they pay more attention to what government is doing. There’s a greater level of political and social consciousness.
“Taxes are not only about boosting government revenues. When people pay taxes, they hold the government to account more.”
Osinbajo disclosed that according to the National Bureau of Statistics (NBS) figures, Nigeria has a taxable class of no fewer than 69 million people, regretting that only 14 million are currently in the tax net.
He noted that only 214 of taxpayers, irrespective of status, pay N20 million or more annually, while about 900 taxpayers pay N10 million per annum.
Providing more demographics, the acting president said all the 214 taxpayers are based in Lagos, adding that of the 900 also paying N10 million, all but two are based outside Lagos.
Osinbajo lamented that from what he saw during the electioneering in 2014-2015 when he traversed the length and breadth of the country with President Muhammadu Buhari, there was a fair spread of high networth individuals, who did not give room for Lagos exclusively producing the number of the biggest taxpayers.
“All of these 214 Nigerians who pay N20 million or more in taxes annually are to be found in Lagos State. I’m sure in this room (and I’m not looking at anyone), there are another 214 people who earn more than N80 million annually,” he said.
Osinbajo’s comment, which drew applause from the audience who felt he was referring to the cross section of governors, ministers and other top government officials, added that “tax evasion is not limited only to wealthy Nigerians and also not limited to individuals. Many companies maintain three sets of books”.
The acting president said a situation where people evade tax would no longer be tolerated, hence the initiative, VAIDS, adding that a tax amnesty will run for nine months, effective July 1, 2017 to March 31, 2018, to give room for tax defaulters to voluntarily declare their assets and pay commensurate taxes.
He stated that at the expiration of the period, defaulters, irrespective of their status, would face prosecution, noting that the government was imploring tax evaders to do the right thing and rapidly come clean for the good of their country or face the full consequences of the law.
“This is an offer in the spirit of national reconciliation and rebuilding and must be taken as such. In addition, because we understand that some taxpayers may have challenges raising taxes, we have built in a system that will allow those owing to pay over a period of time subject to conditions.
“Upon expiration of the scheme, we will consider those who have failed to take advantage of this offer or who have declared falsely, to be willful tax defaulters and economic saboteurs.
“We will then proceed with aggressive investigation with a view to criminal prosecution. We will also publish a tax defaulters list to name and shame those who default,” he said.
The acting president assured Nigerians that the proceeds of VAIDs would not disappear, as they will be applied transparently and invested in key infrastructure projects and other services for the overall benefit of Nigeria and Nigerians.
Osinbajo, who emphasised the need for taxation, quoted Benjamin Franklin, one of the founding fathers of the United States of America, who said: “In this world, nothing can be said to be certain, except death and taxes.”
The acting president also disclosed that because of the importance the administration attaches to VAIDS and the quest to rewrite the nation’s tax trajectory, the federal government has declared every Thursday “Tax Thursday”, to create awareness among Nigerians on the payment of taxes and the accrued benefits.
Osinbajo noted that the government’s goal was to add at least 4 million taxpayers into the existing tax roll by 2018.
The Executive Order, which he signed, would ensure that VAIDS, as designed by the Ministry of Finance, is backed by the full force of the law, culminating in tax compliance and punishment for offenders after the grace period.
Nigeria’s tax-to-GDP ratio is one of the lowest in the world at 6 per cent.
In her remarks, the Minister of Finance, Mrs. Adeosun, said the government has resolved to change the narrative through vigorous pursuit of the VAIDS.
She 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 are 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.
“Finally, the proceeds of this scheme will not disappear. We will provide regular updates on the funds collected to date, and how those funds are being put to very transparent use.”
Various goodwill messages were presented at the launch of VAIDS, including that of the Chairman of the Nigerian Governors’ Forum, who is also the Zamfara State Governor Abdulaziz Yari.
He assured Nigerians that all the states were in support of the VAIDS project and will support it fully in a bid to rewrite the poor tax situation in the country.
Before the launch of VAIDS and the nine-month amnesty granted to tax defaulters, Osinbajo had said the federal government was expected to raise more than $1 billion under the programme.
The funds raised will enable the government to reduce borrowing needs, allow investment in vital infrastructure and spur development, he had said last week.
Nigeria plans to increase spending this year by 21 per cent to N7.4 trillion, according to the 2017 budget signed into law this month.
The fiscal plan, aimed at spurring economic recovery from its first recession in 25 years, requires funds to help Nigeria plug a deficit the government expects will amount to about 2.2 per cent of GDP.
Tax evaders in the country are subject to imprisonment of up to five years, payment of penalties of up to 100 per cent of tax owed plus a compound interest rate of 21 per cent per year, as well as forfeiture of assets.