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VAIDS: A renewed hope for taxation systems?

MODERN and progressive societies are driven by efficient taxation systems. Without a doubt, despite recent strides in the country’s tax administration, Nigeria remains – unfortunately – outside the group of nations that have benefited from top-tier taxation systems. In our view, this dire situation is what the Voluntary Assets and Income Declaration Scheme, VAIDS, aims – and has enormous potential – to remedy, if properly engaged.

This is to be effectuated by increasing tax awareness, compliance and, simultaneously, giving tax defaulters a nine-month time frame to regularise their tax affairs with the Federal and state governments. The move is expected to be carried out through voluntary, truthful declaration of tax arrears within the nine-month window. The scheme, a brainchild of the Federal Ministry of Finance began on  July 1, 2017 and is meant to run till March 31, 2018.

We share the sentiments that VAIDS offers – incentives to the participating taxpayer, waivers of penalties on previously unpaid taxes, tax audits, prosecution for default and an opportunity to spread the payment of tax liabilities over three years. We hope that the overall objective of VAIDS, which is the correction of the plethora of tax anomalies, with a view to generating income for government and ensure better income redistribution, would not become a shambolic exercise.

The revelation by the Federal Inland Revenue Service, FIRS, that there were 29 Nigerians and Nigerian businesses who registered their private jets in South Africa to evade paying tax in Nigeria, is troubling. People in this category also own choice homes in the United States of America, the United Kingdom and the United Arab Emirates and use tax havens to hide their wealth.

With a view to widening the tax net, it is our belief that VAIDS could not have been introduced at a better time, as it offers a much welcome renewed focus on tax, especially from the non-oil sector of the economy, which makes a measly contribution to the nation’s coffers. The country expects to generate an estimated $1billion from the implementation of VAIDS. The programme, it is also hoped, will drive Nigeria’s current tax to GDP ratio from an abysmal six per cent of GDP to 15 per cent of GDP by 2020.  These are laudable projections.

With the alarming dip in oil prices and improbability of them rising to significant levels again, the current administration appears to have, through VAIDS, taken a bold step to broaden the country’s revenue base.  According to the Joint Tax Board , JTB, out of 70 million taxable adults in the country, only 14 million pay tax, with 96 per cent of them on the Pay-As-You-Earn, PAYE, system. A 2015 Knight Frank wealth report listed Nigeria as home to an estimated 770 billionaires (in Naira terms) out of whom only 214 pay taxes of N20 million and above. This provides uncomplicated indications that self-employed people account for only four per cent of taxpayers and that the country’s billionaires are either not paying or underpaying. It also suggests that tax compliance in the corporate sector has been squalid.

Government will do well to deploy appropriate technology to gather relevant data and improve the virility of the tax system to target the self-employed and corporate citizens.  Finally, we believe that equally important is accountability by government, without which increased tax compliance will be a mirage.

The post VAIDS: A renewed hope for taxation systems? appeared first on Vanguard News.

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This post was syndicated from Vanguard News. Click here to read the full text on the original website.

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