As an outcome of the National Executive Council (NEC) meeting held on 16 March, 2017, the Federal Government is set to implement what it calls, Voluntary Asset and Income Declaration Scheme (VAIDS), to mitigate the erosion of Nigeria’s tax base through undisclosed incomes. This VAIDS is also designed to discourage tax evasion among Nigerians, thereby generating more revenue for the government.
Generally, the scheme connotes “willingly making known to a public authority, one’s ownership rights to assets and incomes earned from all sources’’. This will ensure that the claims due to taxpayers on such assets are accurately provided for and that no taxable income is excluded from the tax net.
The Scheme is expected to become operational on 1 May, 2017, and run for up to six months. As proposed by the Government, it will embrace all federal and state taxes such as Companies Income Tax, Personal Income Tax, Petroleum Profits Tax, Capital Gains Tax, Stamp Duties, Tertiary Education Tax and Technology Tax etc.
At the press briefing after the NEC meeting, the Federal Inland Revenue Service (FIRS) Chairman, Babatunde Fowler, noted that only 14 million Nigerians pay tax out of a possible 40 million, while only 214 individuals pay N20 million or more as tax annually. He also stated that the scheme is targeted at increasing annual tax contribution to Gross Domestic Product (GDP) to 15% by 2020 from its present level of just about 6%, whilst generating a conservative estimated revenue of USD 1 billion.
Under the Scheme, incentives will be put in place to encourage early participation and taxpayers will be allowed up to three years to settle their liabilities. For its successful implementation, a Memorandum of Understanding will be gazetted and signed by the Federal Government with each State Government.
Truth be told, we do not foresee a situation where the average Nigerian taxpayer would willingly want to declare all his or her ownership rights to assets and incomes earned from all sources.
From the tax payment statistics announced by the FIRS above, one can easily infer that only about 214 Nigerians disclose total incomes of up to N100 million and above in a year, albeit it is common knowledge that very many high net worth individuals earn far more than this amount each year.
Our hope is that the government will put effective processes and the right amount of incentives in place, in order to achieve the expected results from this scheme.