As the amnesty period under the Voluntary Assets and Income Declaration Scheme (VAIDS) gradually winds down, Ayodele Subair, Chairman of the Lagos Internal Revenue Service (LIRS), says there will be no hiding place for tax defaulters. In this interview, he ruled out treating any tax evader with kid gloves
The effect of VAIDS on LIRS
As far as LIRS is concerned, there have been a lot of enquiries and there have been a lot of taxpayers who have come forward with their applications and we have started to see the effect in terms of collections. It has had positive impacts on our collections. The effect is less than 5 per cent. On the projection, you know it is very difficult. We don’t know how many people are not declaring the true amount. So it is a very difficult thing to project. We have our budget estimate and we also have a department dedicated to VAIDS matters. They have been talking to people. We involve a lot of enlightenment. We have a programme called Tax Thursday where we go to various shopping malls to go and talk to Nigerians and educate them more about VAIDS programme. A lot of clips have gone through social media. We have an announcement on our website and we have educated our staff about the VAIDS programme. It is just difficult to give an estimate but we are realising a lot of revenue from it.
Assessing taxpayers from year to year on taxable income
Don’t lose sight of the fact that it is a voluntary declaration scheme. We are not the ones to assess them. Already, on a year to year basis, we have tried to assess a lot of taxpayers despite all the constraints we have. This programme is actually voluntary. You are the one to come in and tell us you have so much undeclared incomes over the years. This is what I earned and this is what I previously declared. So we are supposed to look at it, try to verify it to the best of our ability; the truthfulness that is involved in that declaration. If we feel otherwise or have any information that person has put forward, then we are going to go beyond what he has declared and estimate what we feel he ought to have declared. Now, what I also feel you are trying to say when you say people have built up their net worth in terms of properties, I can see where you’re coming from. We are examining six years period now. What we are trying to do is say that if you have a house you bought 10 years ago, the money you used to buy the house at that time, was it taxed? We are going to ask those questions. But in terms of the cash you earned from your business as income, that is restricted to six years. So really and truly, it is a programme that relies on voluntary declarations from the taxpayers. And if we then have anything to prove them wrong, then we bring that into effect.
How much remedy do you think VAIDS can bring into the country’s tax system?
In terms of how much VAIDS will bring, probably, you have to consult Ministry of Finance for the actual statistics but it is going to be significant.
In terms of remedial measure, VAIDS has a lot of positives. First and foremost, the awareness that we need to pay taxes is getting more pronounced. A lot of people now see tax as an issue. People who are totally disconnected with payment of taxes have started to hear about it, the adverts on TV and all the advocacies you guys are doing drum home the need that we have to develop and grow the culture of taxation. So that is the key aspect of it.
Two, it will also help us improve on data and documentation. When I speak, I am speaking for Nigeria as a whole now because Lagos has always been on the forefront. Yes, it will bring some incremental revenue to us, but in terms of processes, we have already established every process long time ago. So in terms of aggregate amount, a lot of states will now start to catch up. They will start to appreciate the need to increase their Internally Generated Revenue (IGR). So these are some of the benefits of this VAIDS programme. More data, more tax awareness and more money for development.
Classes of taxes covered by VAIDS
VAIDS cuts across petroleum profit tax, personal income tax, stamp duties, withholding tax and education tax. Primarily, those are the key ones. And any form of taxation that has been previously under-declared or not declared at all comes within the purview of VAIDS.
Why did it take Nigeria so long to initiate VAIDS programme?
Well, we all know the primary cause. The drop in global oil prices reduced the amount of revenue for the Federal Government. A lot of states in the past were not too efficient in the collection of taxes. So many of them relied on the Federal Government revenues to run their states. Lagos took the initiative many years ago not to be dependent on federal purse, to try and be self-dependent. The whole taxation system was reviewed and overhauled in Lagos. You can see the success story.
It became very clear that taxation as a major source of IGR was necessary and so the decision then was, how do we proceed? How do we increase IGR primarily from taxation?
So the tax amnesty programme was, therefore, considered to bring taxation back to the forefront and then to increase participation. It was decided that interest and penalties would be written off if you come and pay your taxes and then you get certain benefits, no prosecution, no further investigation once you declare totally. So, we cannot say it is too late. It is never too late! We have to start from somewhere and we have realised the necessity to increase IGR. So that is why it is coming at this time.
Perhaps, if the oil boom was still on, maybe this initiative wouldn’t have been necessary because the Federal Government is also saving itself undue pressure from the states. You can see that a lot of states cannot even pay their salaries. They go to the Federal Government often to request for more money so that they can pay. If you can’t even pay salaries, how do you develop the state?
The people VAIDS is targetting
VAIDS, like I said earlier, is a programme that has been designed to grow culture of taxation. Nigeria has a tax to GDP ratio of 6 per cent, which is very poor. Other neighbouring countries and some other African countries have a ratio above 20 per cent. So why would we be on 6 per cent? That was one concern. The other concern is, how do we grow our IGR that will lead to further development and provision of social services, which people are clamouring for as dividends of democracy? Now, VAIDS is for everybody because little drops make an ocean. So just like somebody has under-declared hundreds of millions, whoever declared N500,000 is equally important because everything comes to the same port to grow IGR we are talking about. So anybody who has previously under-declared incomes is qualified under this VAIDS programme to come forward within this time of limited opportunity to make good what they have previously not done. It is open to everybody.
No sacred cows under the VAIDS programme
In all economies, there is usually the fear of the very powerful and connected persons.But with this VAIDS programme, it is being made very clear that there shall be no sacred cows. Everybody is supposed to declare where they have previously undeclared. Irrespective of your position in society, you are expected to do the needful and there are serious plans underway to ensure that the full wrath of the law is thrust against any defaulter. The Minister of Finance has been very emphatic on that one. She has openly engaged the high net worth individuals, the very powerful within the society and a lot of warning has gone out already as well as continuous advocacy on the need for them to come in.
Challenge of absence of reliable data
You are right in suggesting that there is a dearth of data generally in Nigeria. It is a problem all tax authorities face. It is something that confronts us by the day; the unavailability of complete or even credible data. When something is not available, it then means you have to devise various efficient means of obtaining this data. In our own case, along with the VAIDS programme, certain measures have been put in place.
First and foremost, we are going to get primary data from all the taxpayers that come forward, they will give us certain data. But on our own, we also have additional processes that have been put in place. There is what we call project light house. The project light house has to do with data mining. We are looking at several sources of information and trying to develop and bring out certain data on all the prominent taxpayers. For instance, the Nigeria Financial Intelligent Unit (NFIU), which certain information resides in, like all payments above N10 million. They are recorded by NFIU. So it is being mined. All the people that have transactions in multiples of N10 million, they have the statistics. Again, the land registers of all the states are also being reviewed and mined. So certain owners and certain properties will be established. That is another mine.
Pertaining to Nigerians who have assets and incomes abroad, there is also what we call automatic exchange of information. The agreement has been signed, Nigeria is party to it and certain countries like UK, UAE, USA, France, Germany are all signatories. So they are going to compile register of Nigerians who own properties abroad and who have large bank accounts; they are going to compile all these lists and hand it over to the Federal Government. And the Federal Government, in conjunction with the state internal revenue services, are going to have access the confidential information.
And part of the agreement is that it is kept confidential and restricted to certain level of persons. But primarily, we are going to have the information. Now if you have assets, we shall ask questions. What was the source? which year did you acquire these assets? Were those sources taxed? If those sources were taxed, it is not going to be subject for further taxes. But if you were able to establish that you made all that money in Nigeria and transfered it abroad to buy assets, then we are going to subject those amounts to taxation in Nigeria. Also, if you have huge balances in your account abroad, we are going to ask questions, what was the source? And if it came out of Nigeria even elsewhere, we are going to ask, was it taxed? Because even if you earn income abroad, as long as you are resident in Nigeria, you file your taxes here. It is also subjected to Nigerian tax law.