The Federal Government of Nigeria on June 29, 2017 introduced a tax amnesty programme which provides a platform for tax defaulters to regularize their tax positions. The policy as expressed in the Executive Order 004: On the Voluntary Assets and Income Declaration Scheme (“VAIDS”) signed by Acting President Yemi Osinbajo at once reflects government’s desire to widen its tax net while also offering some benefits to tax defaulters who voluntarily declare their assets and pay their tax liabilities.
The executive order is a far-reaching regulation which applies to all tax entities and all tax laws currently applicable in Nigeria. It therefore means that individuals and corporate entities who earn income but have failed to register, have registered but defaulted or underpaid their taxes to some state governments can take advantage of the scheme in just the same manner as any other entity in default of a federal tax may similarly do same.
Benefits offered under the scheme also apply to businesses that are presently being audited by tax authorities or challenging the extent of their liabilities in court provided that they are open to an out-of-court settlement. This is particularly commendable and saves business managers costs otherwise expended on litigation. It however also places a duty on the government to retain competent assessors capable of fairly assessing the disputed tax claims and guiding parties to a mutually agreed sum to prevent recourse to litigation which would then defeat the objectives of the scheme.
The benefits to be specifically derived by persons who voluntarily declare their assets and income under the scheme include immunity from prosecution for tax offences, immunity from tax audit, waiver of interest, waiver of penalties, and the option of spreading payment of outstanding liabilities over a maximum period of three years as may be agreed with the relevant tax authority. Voluntary compliance under the scheme cannot however invalidate any accrued interest or penalty already imposed by a court order on any tax defaulting entity.
Notwithstanding the benefits attached to voluntary compliance under the scheme, it remains possible that some tax defaulters may be unwilling to voluntarily comply thereby attracting consequences contained in Section 8 of the Order which includes liability to pay in full the outstanding tax with penalty and interests where applicable as well as possible criminal prosecution. For businesses who comply but fail to fully declare the extent of their tax liabilities, whatever sum is paid on the declared liabilities may be considered as part payment of the outstanding sum later discovered by the authorities.
It is also instructive to note that Nigeria’s Federal Inland Revenue Service (“FIRS”) has concluded plans to begin the implementation of the Standard for Automatic Exchange of Information (“AEOI”) in Tax Matters hereafter referred to as the AEOI Standard, from January 1, 2018. The FIRS will be working in partnership with the Global Forum on Transparency and Exchange of Information for Tax Purposes under the auspices of the Organisation for Economic Co-operation and Development (“OECD”) to implement the AEOI Standard.
Upon implementation, the AEOI Standard will enable FIRS receive information from tax authorities in other countries where Nigerians own assets on an annual basis without having to send a specific request and thereafter use such information to implement measures against tax evasion. Information to be shared will include specific details on the assets, dates of acquisition, sources of funds used to finance such acquisitions as well as tax returns and liabilities prior to and subsequent to the acquisition of such assets.
We expect that diligent enforcement using information obtained under the AEOI Standard will complement the VAIDS introduced by the Nigerian government by helping to uncover previously concealed assets and revenue sources. Individuals and corporate entities are therefore encouraged to take advantage of the 9 (Nine) month tax amnesty window under the VAIDS to voluntarily declare such assets and income sources home and abroad to mitigate tax liabilities that may have accrued.