VAIDS and How looted funds’ probe exposed wealthy Nigerians evading billions in tax — Adeosun, Finance Minister

No Comments » July 9th, 2017 posted by // Categories: Nigeriawatch



 

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The Voluntary Assets and Income Declaratory Scheme, which the Acting President launched and signed an Executive Order on (penultimate Thursday), is a nine-month scheme and what it does is to allow tax payers, both companies and income earners, to regularise their tax affairs…….For instance, we looked at property owners abroad in high value areas, we looked at BVN and we found out that some people’s assets and life styles when compared to their tax returns just do not add up. An individual who has about six properties, for instance, has a tax clearance that shows he only paid N150,000 for the year. That’s the sort of evasion we discovered……There are forms for individuals and there are forms for companies that they can use to honestly declare and what they would be doing would be to come clean and declare. What that means is that they are saying in the last 5/6 years they have not been paying tax as they should and, when you restate your earnings, you’re expected to pay a penalty of 10% and an interest of up to 21% per annum. But with what we are trying to do now, we are waiving the penalty and interest if you declare fully and honestly – that’s what the nine- month window is set to do.
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My People:
No matter what the people think, some fundamental tectonic shifts in the attack against corruption are going on in our country, whose effect may not be felt until some years down the road.  The fulcrum is the proper use of BVN to trace assets and income, and to hold people and companies  – particularly politically-exposed persons and high-earner international companies –  accountable to the financial records linked to them.  The fear of illicit money being linked to one, and the associated sanctions, will discourage such corrupt activities, as has happened done elsewhere.
In general, criminals don’t like being caught, and if the possibility is high, they look for other line of work.
The difference is the will of the leadership to do what is right, and that is related to those who would enforce the law NOT participating in the corrupt activities themselves.
We shall see how far VAIDS succeeds.  The Minister of Finance and the FIRS Director who championed it, and the Acting President who signed the Executive Order, must all be commended.    However the post-VAIDS period is even more important.
And there you have it.
Bolaji Aluko



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29 June 2017

Voluntary Assets and Income Declaration Scheme (VAIDS) has been launched

Declare your assets and income honestly, pay the taxes due correctly, then go and sin no more or …

VAIDS

Today 29 June 2017, the Acting President, Prof. Yemi Osinbajo, SAN formally launched the Voluntary Assets and Income Declaration Scheme (VAIDS). The Scheme will commence on 1 July 2017 and last for a period of 9 months. VAIDS is an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities.

The Scheme would be implemented by the Federal Inland Revenue Service (FIRS) in collaboration with all 36 State Internal Revenue Services and the FCT IRS. Government would gather intelligence locally and through various international conventions and multilateral agreements to obtain information required for prosecution of defaulting taxpayers or those who make false declarations. An international forensic and asset tracing company has been engaged to support this process.



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Vanguard

How looted funds’ probe exposed wealthy Nigerians evading billions in tax — Adeosun, Finance Minister

•Says only 214 rich people paid something close to the right tax
•Speaks on the nine-month window for defaulters to pay or face severe action

In this interview, Minister of Finance, Kemi Adeosun, explains that the reason for the new tax policy is pursuant to government’s determination to capture as many as possible in its tax net to enhance revenue generation beyond oil receipts.

Finance Minister, Mrs Kemi ADEOSUN

The Acting President just signed an Executive Order, suggesting amnesty for tax defaulters – is that what the order is about?

The Voluntary Assets and Income Declaratory Scheme, which the Acting President launched and signed an Executive Order on (penultimate Thursday), is a nine-month scheme and what it does is to allow tax payers, both companies and income earners, to regularise their tax affairs.

We’ve done quite a lot in the last 15 months, looking at tax compliance in Nigeria. Our tax-to-GDP ration is just 6% and is one of the lowest in the world; so we did a study asking why Nigerians are not paying tax and why our tax revenue is so low and what we found was that there is massive tax evasion on a very massive scale. A lot of people are not registered; while those who are registered, a lot of them are not paying their tax and we now have the data. We hired experts to help us drill through this and what we found out was that people’s life style, which should reflect their tax regime, did not find correlation – between their life style and their tax returns. So discovered massive tax evasion. For instance, we looked at property owners abroad in high value areas, we looked at BVN and we found out that some people’s assets and life styles when compared to their tax returns just do not add up. An individual who has about six properties, for instance, has a tax clearance that shows he only paid N150,000 for the year. That’s the sort of evasion we discovered.

When you say that, it means you have been investigating some Nigerians?

Yes, we have and we have been doing that for 15months now from various sources. Technology has been very helpful in helping us build a financial data of Nigerians from BVN, from FOREX records, foreign property records and we also engaged the services of one of the world’s renown private investigation firms and they actually traced property owners abroad.

How did this come about?

It actually started when we attempted to trace the whereabouts of stolen funds and, suddenly, we started getting feedback that it’s not just stolen money but untaxed money, that a lot of money has gone out of this country and used to buy properties in high scale areas and the data they were returning to us was such that you would marvel. So, we then began to look very closely at the level of tax compliance and what we found out was that Nigerians were not paying; so we decided that instead of pursuing everybody, we should create a window for people to voluntarily come forward and regularise their tax.

Do you have a figure of how much you think Nigeria has been short-changed, say on a yearly basis?

It’s significant, very significant. The tax-to-GDP ratio is embarrassingly low. Ghana’s is 15.9, most developed countries are about 30 and the truth is that very few people are paying tax.

In the Acting President’s speech, he gave some statistics from the figures we picked from the FIRS. We said, for instance, how many Nigerians pay the tax of N20million or more. To pay N20million in tax suggests that you made an income of about N80million. Our discovery was very shocking because for the whole country, only 214 people paid that much and above. More shocking is the fact that all of these 214 people are from Lagos State. So, are we saying we do not have any rich people in other parts of the country, or are we saying there are only 214 people earning N80million or more? It’s not possible and those were the things we found out and which made us decide to create that window of opportunity for people to do the right thing. Pursuing every tax evader would make you spend years in court. With this window, Nigerians can come forward and regularise their papers and, after the window, those who refuse would then be dealt with using the data and discoveries in our possession.

How does it work?

There are forms for individuals and there are forms for companies that they can use to honestly declare and what they would be doing would be to come clean and declare. What that means is that they are saying in the last 5/6 years they have not been paying tax as they should and, when you restate your earnings, you’re expected to pay a penalty of 10% and an interest of up to 21% per annum. But with what we are trying to do now, we are waiving the penalty and interest if you declare fully and honestly – that’s what the nine- month window is set to do.

In January 2018, there’s something called the automatic exchange of information in which Nigeria is involved and what that means is that from all the tax havens jurisdictions abroad we will automatically get access to information on Nigerians. The Panama papers revealed a lot and Wikileaks also did a lot of data mining and picked up a lot of Nigerian names and we’ve identified quite a number of people who do not pay the right tax.

In your collaboration with the UK government, what were you able to discover?

Significant. A number of property ownership came up. When you marry the type of properties we have identified some Nigerians with abroad, with what they pay as tax, it is just unfair what is going on. The British, the Americans, the UAE and even the Canadians are cooperating.

But if people own properties abroad, are they expected to pay tax here in Nigeria?

The issue is that the property abroad, when you purchased it, where did the money come from? If that money came from Nigeria and you’re tax-resident in Nigeria, one would assume that you’ve paid tax on the money before you bought the property. If, for instance, you bought a property for N100million and we can see that in the preceding year, you had declared an income of N100million, then we do not have any problem with you. But if what we are seeing is that you bought a property worth N100million and what we are seeing is that you earned just a million naira, the question is, where did you get the money to buy the property? In that case, we could go after that property because it’s either you stole the money or just didn’t declare tax on it? Either of the two is a crime. Now, we can see people’s assets and we can walk backwards and ask, how did you make the money? If you say you borrowed money, show us the documents. If you say you inherited it, show us proof. But if you’re not able to show where you earned the money from, then it is either you stole or made it without paying the right tax.

How much are we hoping to recover this way?

I haven’t set a specific target because it’s very difficult, but anything over a billion dollars would be great. Meanwhile, let me just give you a context where a couple of countries have done this where they raised between $7billion and $15billion, so it really does depend on the compliance level. Mind you, it is not just about high net worth Nigerians we are talking about – though they are a big target. There are also lots of companies evading tax and paying minimum price and shifting jurisdiction through transfer pricing but will make sure Nigeria gets a small percentage of money generated. We only have 14million tax payers in Nigeria and majority of them, about 13.2 per cent, are pay as you earn. So, the structure of our economy is such that majority of the people either work for themselves or earn their own money or are company directors, they are the people that are not in the net. They are not in the net at the high end and they are not in the net at the low end and we are trying to correct both at he same time.

Why do you think people are not paying tax?

I think it’s a combination of things because people do not want to pay tax anywhere in the world. If there is no consequence for not paying, people will not pay. But there is an argument that has been going on for a while about government’s responsibility and such argument is very convenient but it leads nowhere. It’s about which one comes first, the chicken or the egg, but if you look at successful nations, they have a very high tax compliance rate. So, in Nigeria, we have to decide what we want: Do we want progress or do we want to carry on the way we have been carrying on and which has led us down this path? To me, continuing this way is not sustainable.

How do you plan to handle the fear of being named and shamed when people come forward?

As part of this work, we studied countries that had done this before – Indonesia, South Africa, India and Turkey – and one of the things we discovered is that people were worried about being embarrassed. So one of the things that we’ve done is to set up a very small unit which works very confidentially and which allows people to come forward through their lawyers to explain their situation, and we are making such that whatever information they provide is confidential and leaking such information is a crime. It’s an offence to leak such information and, for some category of Nigerians, we are handling that directly and you can come to my office because there are certain special persons whose tax situation is critical; they know and we also know, so they can come and discuss with us one on one.

You talked about employing some 7,500 N-power employees

Yes, we have recruited some and the first batch has been trained – a one-week intensive programme in communication skills and so on. We discovered that a lot of people just come into business without knowing what their obligations are concerning tax. Some people just open a business without knowing that they have to register for VAT. So these people will be going out to educate people – at the airports, schools, markets and so on. We’ve declared Tax Thursday for one year and we are asking state governors to organise events and educate ourselves on the need for compliance. We are looking for people who can just go out and educate people.

How does this concern the state governments?

The state governments too are involved because it would be to their benefit if they get more people to pay tax because it would improve the fiscal health of the states and the mantra of ‘less depend less on oil money’ needs to be given effect and not just by word of mouth. Many countries have no natural resources but they rely on tax. We also expect that when people begin to pay tax, it would require state governments to provide services and amenities to their people and that is where accountability is improved because their money is involved, rather than just oil money coming from Abuja.

Which types of tax are we talking about?

Companies’ income tax goes to the Federal Government and that’s shared in FAC; VAT comes to the Federal Government but is shared in favour of the states because 85% goes back to the states. Personal Income Tax, that’s the one you and I pay, goes to the state of residence; so we are covering all taxes. What is going on is not fair because only the PAYE is about fully compliant.

So, what’s in it for Nigerians?

Oh! It’s about service delivery. This administration is very focused on delivering the goods for the people and this is not political. We have said we will not condone corruption and, if we could deliver on some promises when there is no money, you can then begin to imagine what we would deliver when there is money. It would improve accountability. People will be able to ask more questions.

This interview was first aired on Channels TV

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