An assessment of VAIDS

The Voluntary Assets and Income Declaration Scheme (VAIDS) is a policy of the current administration to encourage tax payment and increase the government’s tax revenue. The policy provides a dated window for eligible taxpayers to regularize their tax status through voluntary declaration, which allows them pay due tax without overdue interest and other forms of penalty associated with tax default. Individuals and companies that take advantage of the window are also exempted from prosecution and investigation. Beyond the generation of revenue for the government, VAIDS also serves as an opportunity to increase the nation’s general tax awareness and compliance. This is highly important considering the abysmal level of tax awareness and compliance in this part of the world. A report by the Joint Tax Board shows that only 14 million out of an estimated 69.9 million Nigerians who are economically active are actual tax payers as at May 2017; 90 percent of this population are salary earners and they pay their taxes via P.A.Y.E (Pay Before You Earn). This explains why our tax to GDP ratio is one of the lowest in the world.

The report also revealed that only 40 super rich, High Net-worth Individuals (HNIs) pay correct tax on their income. HNIs are categorised as individuals who earn above N40 million a year, yet there are only 40 of such in our nation’s tax records, suggesting that there are only 40 super millionaires in Nigeria. Yet Anambra State alone is touted to have more than 14 billionaires. In another instance, the Minister of Finance, Kemi Adeosun revealed that some people declared income of N10 million yet own property abroad. Surprisingly, only 241 people in Nigeria were paying above N20 million taxes while South Africa has 950,000 people paying equivalent of the same amount. This is not to suggest that there are more millionaires in South Africa; rather it is a reflection of our weak system. Gratifyingly, the Minister disclosed that about 500 Nigerians, whose records show under-declaration of income, would be served letters inviting them to take advantage of the tax amnesty to regularise their tax status and avoid prosecution and fines.

Hidden in the above statistics is the huge potential revenue that could accrue to the government from tax collection if the right things are done. VAIDS is one attempt to usher a new tax dispensation in our nation and it is important to assess its performance and ascertain if it has truly lived up to expectations.

At a media workshop in Lagos recently, the Executive Chairman of the Federal Inland Revenue Service, Babatunde Fowler, stated that a total of N17 billion had been realised from the scheme in six months of its operations. He believes the scheme which is to last nine months from 1st July, 2017 to 31st March, 2018 has done considerably well in that regard. Fowler also indicated that additional N6 billion would be realised before the end of the year. Inasmuch as N23 billion may be considered a huge success, it still shows that there is a long way to go in the government tax drive.

Considering the dwindling oil revenue, the endless possibilities that lie in tax provide veritable alternative for income generation. VAIDS is certainly a short term attempt to exploit the possibilities but that is surely not enough. The question that should be answered is “what happens when the current policy elapses?” Being a time-limited policy that is opened for only nine months, what are government’s plan to ensure that every eligible tax payer pays the appropriate tax after the specified period? It is okay to declare amnesty but the most important goal should be to instil the virtue of voluntary willingness to pay tax after the amnesty. We cannot completely rely on prosecuting every defaulter when our system has not been built to check and prevent people from short-changing the government. It is a natural occurrence for people, especially for the High Net-Worth Individuals, to attempt tax evasion. This is a global reality that is not peculiar to Nigeria. The only difference is that the laws and the systems are strong enough to capture defaults, prosecute and jail culprits no matter how highly placed. On the contrary, our system is so weak that the people that should be paying more taxes are paying less because they have mastered the art of circumventing the system while the ones that should be paying less are actually paying more because they do not possess the wherewithal to beat the system.

With other policies such as the Bank Verification Number, the government should be able to institute a system that effectively tracks tax payment in a way that increases the country’s tax receipt. VAIDS will soon be over and when it is, will we rest on our drive on tax payment?