In a bid to capture more people in the tax net, increase tax compliance and raise Nigeria’s tax-to-GDP ratio, considered among the lowest globally, the federal government last year launched the Voluntary Assets and Income Declaration Scheme (VAIDS). In this interview, the Executive Secretary of the Joint Tax Board (JTB), Mr. Oseni Elamah, says the scheme is poised to radically change the nation’s tax system. Ndubuisi Francis provides the excerpts
The Voluntary Assets and Income Declaration Scheme (VAIDS) was introduced by the Federal Ministry of Finance last July to address the nation’s tax anomalies. Do you see this being done effectively?
VAIDS was initiated by the Honourable Minister of Finance. It’s a federal government project. As you can see, it was formally launched by the then acting president (Vice President), Prof. Yemi Osinbajo, and this is in line with the various provisions in the tax law. What it has only done is to ensure that it is more inclusive, and create ease of compliance with a lot of Nigerians. It has also helped to sensitise people, to enlighten them so that they know their rights under the law and take full advantage of it. I think it’s something that is very laudable and effective which will help to create a more tax-friendly environment.
What classes of taxes are under VAIDS?
All taxes, whether they are corporate taxes or individual taxes; all taxes that are provided for under the law. As you are aware, you can’t raise taxes without the instrumentality of the law. Every tax you see is a creation of provisions of the law, and what differs is who collects what. The Federal Inland Revenue Service collects taxes relating to education tax, technology development levy, etc. The state collects personal income tax , consumption tax. Local government also collects some form of taxes for birth registration, markets, motor parks.
What are the specific benefits of the scheme to the federal and state governments?
The specific benefit is that it will enable all tiers of government to bring more people into the tax net, and ensure that all incomes that are subject to the tax are brought to their net and taxed and enhance revenue of the various tiers of government. Most importantly, it also creates a kind of social contract between the government and the citizens because if they tax your income, you are demonstrating that you are a responsible citizen and there are certain basic social benefits that you are expecting government to provide such as security, good road, health, generally good governance to ensure that there’s welfare of the citizens and people can pursue their God-given talent and generate much income and give what is due to government.
How can hidden incomes/assets in Nigeria and abroad as well as those belonging to self-employed Nigerians be discovered, given the paucity of taxpayer data and general unreliability of data in Nigeria?
We are in an age of technology and ICT actually is an enabler of tax but it’s very critical that for you to be able to bring people under the tax assessment, you must have a reliable database that you can trust the integrity of information that you get from it. If you do not have a reliable database, you can’t even assimilate the major fraud in other platforms, let alone using those information to bring people to tax. So what is very critical is the responsibility that is saddled under the tax identification number, to ensure that there’s universality of information that is available to all tax authorities. Somebody moves from Lagos to Sokoto, the person is identified through the system and eliminate the incidence of double or multiple taxation. So it’s very critical and we are doing all that is possible for us to have that platform put in place. In that platform, you can exchange information with various other platforms and interrogate information from those platforms to get additional information. We have various tax treaties with other countries and we share information with the aid of technology and using the tax identification number, you can also trace the access on income of Nigerians worldwide.
How has the level of compliance been?
The scheme came into being in July. It’s supposed to end 31st of March. We are still collating information as to who are those that are taking advantage of this scheme. Just yesterday in Lagos when we were leaving the Federal Inland Revenue Service retreat, we had requested the state to give us feedback because we normally collate returns from those states and I believe that by the end of this week, the returns will be in but the feedback we are getting (we want them to be backed by statistics), are also quite encouraging because what that has done is that it has created a window of opportunity for people to be able to come forward voluntarily and truly declare their income and save themselves the hassles of penalties and interests, and in most cases, criminal prosecution can come up for tax evasion. So we will be in a position to give you some statistics to back up the level of compliance under this scheme.
Not a few people believe that VAIDS was conceived as a tool of political witch hunt. Is the belief without basis, given the country’s history of deploying state institutions against political opponents?
The taxman is not a political agent. The taxman, by provisions of the law, have access to so many information and it’s a profession, so the professional ethics also brings all levels of discipline on how you manage the information that are at your disposal. I think the perception has been because of the way the Voluntary Assets and Income Declaration Scheme was initiated and then flagged off because it needed an executive order, to say let us create this window and have in the various authorities that have the power under the law to waive some potion of taxes to key into it. We are looking at previous non-compliance with the law, because once you are afraid not to comply with the law, it amounts that you have evaded tax which is a criminal issue. We want to have an all-inclusive governance and using tax let people take this opportunity, so that we can begin to get citizens to take ownership of the tax administration system. It doesn’t matter which government is in or out. If you check the provisions of the law, the tax man can carry out the tax investigation backward six years without the person who was there at that time. But what this scheme is doing is that previously you have evaded taxes, we carry out the assessment but we will not apply the sanctions that would have been applicable because you evaded tax. We remove the issue of penalties, interest and not press criminal charges against you for tax evasion. So I think people should take advantage of it, it’s not a new law, it’s riding under the provision of the various tax laws where this kind of windows are available. But again we are doing it in a holistic manner at various levels of government so let us key into this scheme and see how we can use that to bring more people into the tax net.
How much cooperation is coming from members of the Joint Tax Board, of which you are the Executive Secretary, and what are the specifics of this cooperation?
The scheme says any person that comes under this declaration there’s no sanction. These laws are already there, if you don’t declare, the normal tax law provision apply. I think that is just the normal perception, the rich are the most powerful but come to think of it we are about 180 million people in Nigeria, today both corporate and individual that pay taxes that we have in our record is just about 14 million, the bank verification exercise revealed that individual account holders of over 30.5 million have accounts which means that they are economically active and viable to have money to put in account. The National Identity Management Company’s database shows about 22 million Nigerians. So, you find out that those who pay taxes are just few out of the entire working population. Today, about 62 million Nigerians are gainfully employed in one form or another but all you see are only those that are in formal sectors. So I don’t know of any Nigerian that has been above the law and has not been brought to book. If there are, I think the members of the noble profession, the press, should sensitise it. The difficulty we have always had is that we do not have clear way of identifying who should be paying what taxes. What we are only telling the members of the public is that the taxman knows you beyond you know yourself now. We have this information but we just want you to take advantage of this window. After 31st of March, 2018, we begin to serve some love letters. So those hidden assets and income you hid somewhere, we will bring them out. From this exercise and other similar exercises that we are doing to ensure that we have a reliable database, we expect that at the end of this exercise we should have not less than 40 million Nigerians in the tax net and given the amount of assets and income we see. Just yesterday, the Federal Inland Revenue Service collected taxes of N4.02 trillion which is far beyond what was collected in 2016, in this year’s budget they are anticipating to collect N6.4 trillion. From this exercise, we expect that 1billion dollars which translates to about N320 billion will come at the federal level. At the state level, the figures just tell you so much possibilities that are there. We believe that there are states that can generate enough to sustain themselves outside the federal government allocation. When we make available these figures from last year you will be able to have an insight as to what we are looking at this year and the years ahead.
The reluctance by people to pay tax is traceable to poor service delivery. Should we blame the people?
For example, you don’t think government is providing enough security. But is that a justification for you to start committing crime; that you do not have the roads or water you expect? What we are saying as revenue administrators is having put a government in place to exercise authority under law, who also under law ensures that you make your own contribution by paying your taxes, now having paid your taxes, there’s a social contract between the governed and the government and how do you now demand for accountability having taken ownership of that? You can now ask this question. If you don’t pay your tax even your right as a citizen is compromised. So if you pay your taxes then you can know the question because you put those who are there in government. It’s not for we tax administrators to give you reason why it didn’t happen, we are just playing our own role of ensuring to do what we are meant to do under the law.
What countries have implemented successful tax amnesty programmes?
I don’t want to be quoting statistics, I will like to quote them directly as they come to us, because what we did was to not try to reinvent the weak but let’s see what has worked in some other places and then go ahead to implement it. But let’s also not forget that our environment, conditions of implementing laws differ from country to country. So we must first of all look at the attitude of our people, mentality and how the government’s structure itself works. Like I said ,these laws they have always been in place, what has been lacking is awareness on the political way to effectively enforce these laws. The thing is that you must get people to take ownership of the system and in taking ownership people will not give what they don’t have, if they don’t have the information or knowledge they can’t take ownership of the system, that’s why it’s very important that what you are helping us do will help to sensitise, educate and enlighten people. Let them know that their payment of taxes will help the social contract between the governed and the government and that gives you certain level of rights where you can demand for accountability after those tax payers money have been used.