‘VAIDS will help states to increase their IGR’
LIRS chairman, Hamzat Ayodele Subair, spoke on tax matters in an interview with PAULA ESEGHENE and VICTOR UZOHO
This is the first time we are meeting since you came on board. How much revenue have you been able to bring to the Nigeria tax system?
Well in terms of how much revenue Ii will bring, then you probably would have to consult with the ministry of finance for the actual statistics but it’s going to be significant.
As a remedial measure, how do you believe it will improve the tax base?
As a remedial measure, VAIDS has a lot of positives. First and foremost, it’s the awareness. The need to pay taxes is getting more pronounced. A lot of people now see taxes as an issue. A lot of people who are totally disconnected with the payment of taxes has started to hear about it and see the visuals on T.V and all the advocacy that the press is doing is dropping home the need that we have o develop and grow the culture of taxation and so that is the key aspect of it. One is also going to help us to improve data and documentation. When I speak, I’m speaking for Nigeria as a whole now because Lagos has always been in the fore front. Yes, it will bring some incremental revenue to us in terms of processes; we have already established all these processes a long time ago. So in terms of the aggregate amount, a lot of states will now start to catch up and they will start to appreciate the need to increase their IGR so these are some of the benefits of the VAIDs programme. More data, more tax awareness, more money for development.
Are there certain class of taxes that cover liberator?
VAIDS cuts across companies income tax, petroleum profit tax, personal income taxes, stamp duties, withholding tax, education tax, and any form of taxation that is previously under declared or not declared at all come within the body of it.
It appears as though Nigeria is coming in late into this, as we know if those tax adds so much value, how come it took so long before we got into this?
Well, we all know the primary cause of this. The drop in oil prices reduced the amount of revenue for the federal government. So a lot of states in the past has not been too efficient in the collection of taxes so many of them relied on the federal government for revenues to run their states. Lagos took the initiative many years ago not to be dependent on the federal government. To try and be self-dependent and whole taxation system is reviewed and over held in Lagos and you can see the success story. Again I speak for the whole of Nigeria, in terms of deriving revenue for the state, it became very clear that taxation as major source of internally generated revenue, was necessary and so the decision then was, how do we proceed and how do we increase IGR primarily from taxation and so a tax amnesty programme was therefore considered to bring taxation back to the fore front and to increase participation, it was decided that interests and penalties will be written off and then you will come and state your taxes and then you get certain benefits. No prosecution, no further investigation once you declare truthfully so you cannot say it’s too late. It’s never too late. We had to start from somewhere. We have realised the necessity to increase IGR and so that is why it’s 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 from undue pressure from the state. You can see that a lot of states cannot even afford to pay their salaries and then they go to the government, cup in hand to request for more money so they can. If you can’t even pay salaries, then how do you develop the state?
You said that VAIDS has encouraged the collection of data but am thinking that in certain cases, some people are out of the hook, when you look at the north for example and they are very wealthy people who don’t use the banks. How are these people going to be made to comply with VAIDS and we are also looking at people with access and incomes abroad how do we get these people to also comply?
You were right in suggesting that in data generally in Nigeria, it’s a problem that all tax authorities face. It’s something that confronts us. The unavailability of complete or even credible data. So when something is not available it therefore means that you have to derive various efficient means of obtaining these data. So in our own case along with VAIDS program, 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. They are what we call Project Light House and this has to do with data mining. We are looking at several sources of information and trying to develop and bring out certain data of all the prominent taxpayers. For instance, the NFIU under which certain information resides like all payments above N10 million are recorded by NFIU. So it’s been mined. All the people that have had transactions in multitudes of 10million, they will have the statistics. Again, the land registers of all the states are also being reviewed and mined. Certain owners of certain properties will be established. Pertaining to Nigerians who has assets and incomes abroad. There is also what is called the automatic exchange of information.
The agreement has been signed and Nigeria is a party to it and certain countries like the UK, UAE, USA France, Germany, are all signatories to this. So they are going to compile registers of Nigerians who own properties abroad and who has large bank accounts and 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. Its confidential information and part of the terms of the agreement is that it is kept highly confidential and restricted to certain levels of persons but primarily we are now going to have information. Now, if you have access, the Importance of that to us is that we shall ask questions of what was the source through which you acquired those assets. Where those sources taxed? If those sources where taxed then you are not going to be subject to any other taxes but if we are able to establish that you made all that money in Nigeria and transferred it abroad to buy assets then you are going to subject those amounts to taxation in Nigeria. Also if you have huge balances in your accounts abroad, we are going to ask the question of what was the source and if it came out of Nigeria or even elsewhere, we are going to ask if it were taxed because even if you earn income abroad, as long as you are resident in Nigeria and you file your taxes here it’s also subject to Nigerian tax laws. So that way, we are going to be able to build up data on taxpayers with which you can profile them for the unpaid taxes so that is the scheme. Now, talking about people who might put money under their maturases and how we get information.
The truth of the matter is, there is nothing we can do about people who are involved in cash transactions so the government over the years has made a huge effort to try on financial inclusiveness, to allow a lot of Nigerians to operate bank accounts. Even the banks are carried along in this. They were encouraged to open branches even on the most remote part of the country. So with the people who run their accounts through the banks, it is going to be easy for us to get the information through the Bank Verification Number (BVN). The BVN is going to be very fundamental in deciding the success of VAIDS because it gives information on all the banks accounts that are owned by individuals because in the past, if we want to profile you as a tax payer, we don’t have the financial statements of your business and it will be very difficult to profile you as a tax payer. You can say that you earn N1 million, and bring the bank statement that supports that amount but with the BVN now, we know all the various banks accounts that belong to that individual and we can also view all his bank statements. If for instance you have a N100 million running through your account then you have to account your previous declaration of only N1 million. So we are going to have to be ingenious in building up all the necessary data that we need to be able access the tax payers but this is already on going. Even prior to the declaration of VAIDS programme a lot of mining has been going on. For instance, if you own a shop in Alaba and you tell us that your income Is N2 million and also there is also mining of all the customs duties paid if for instance in the data that was obtained, and you have shipped in goods worth N200 million and have sold all those goods and made profit and it’s a one man business he will have to explain what accounts for the difference. So we are going to have to build up a lot of data with which we can profile the taxpayers and that is one of the beauty of the VAIDS programme.
The federal government has repeatedly said that it will not extend the deadline for the VAIDS programme, don’t you think that the nine months stipulated period is short to allow people to declare their assets?
It’s not short because even if you make it three years, two months to go, Nigeria will still clamor for an extension. This extension talk started within one month after the executive order on declaration. So it’s not going to change. 6 months ago, people were saying is this amount of time going to be enough? How long do you need to declare income that you have previously not declared? It was a bit slow in 2017. Though it was mostly enquiries. A lot of people were concerned and were making enquires. January, people started coming in, February, there were more people that were coming in and more people are making enquires and people were deciding whether to come into the VAIDS scheme or not. So this issue in every sphere of our lives, be it registration of INEC cards, whatever you come out with in Nigeria here, always clamouring for extensions. The Minister for Finance, Kemi Adeosun has been very clear on this issue that she and the government will not entertain extentions and I think it should be kept at such. That’s my personal take.
It’s been almost eight months into the programme, how has been the effect of the VAIDs programme considering that the deadline is not far off?
As far as LIRS is concerned, there has been a lot of enquires and there has also been a lot of tax payers who has come forward with their applications and we are starting to see the effect in terms collection. It has had a positive impact on our collections. To contextualize it, it’s less than 5 per cent effect on us.
Do you have any projections?
You know it is very difficult. We don’t know how many people are not declaring the truthful amount and so it’s a very difficult thing to project. We have a budget estimate, which I won’t really divulge here but definitely, we have a budget estimate. We have a department dedicated to this VAIDS matter. They have been talking to people. We have been involved in some kinds of enlightenment. We have a programme called tax Thursday where we go to the various shopping malls to go and talk to Nigerians and educate them more about this VAIDS programme. There are a lot of clips that has gone through social media. We have announcements on our website talking about VAIDS. We have educated all our staff on this VAIDS programme but it’s just difficult to give you a definite estimate but we are realizing a lot of revenue from the programme.
In your final analysis, are you sure that VAIDS is going to be fair to some people? Someone might have built his net worth over a long period of time, how will you be able access year to year of what should be taxable?
Don’t lose out of the fact that it is a voluntary assets declaration scheme. We are not the ones going to Asses them. Already on a year-to-year basis, we have tried to asses them despite all the constraints we have. So this programme is actually voluntary. They are the one who is supposed to come in to tell us, I have so much undeclared income over the years. This is what I have earned and this is what I previously declared. And so we are supposed to look at it and try and verify to the best of our ability, the truthfulness that is involved in that declaration. If we feel otherwise or have any information that contradicts what the person has put forward or go beyond what he has declared and estimate exactly what he out to have declared.
Now what I also think you are also trying to say is that when you say that people have built up their net worth in terms of properties but what we have done is say that if you have house that you have bought ten years ago, that money that you used to buy it 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 6 years. So really and truly, it is a programme that relies on voluntary declarations from the tax payers and then if you then have anything to prove them wrong, then we will bring that into effect.
I have met people of my age and profile, who thinks that VAIDS is not for them. They think that VAIDS is for a particular set of individuals. Who exactly was VAIDS designed for?
VAIDS like I said earlier is a programme that was designed to grow the culture of taxation. Nigeria has a tax to GDP ratio of 6 per cent, which is very poor. Neighboring 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 was how do we grow our IGR that will lead to further development and provision of social services, which people are clamoring for as dividends of democracy? Now VAIDS is for everybody because little drops make an ocean. Just like somebody has under declared a N100 million, whoever has declared N500,000 Is equally important because everything comes into the same pot to grow this IGR that we are talking about. So anybody who has previously undeclared incomes would qualify for this VAIDS programme to come forward in this time limited opportunity to come and make good, what they have previously not done. So it is open to everybody.
There is a prevalent belief that people with very strong social and political links will escape some sanctions after the expiration of the window. For example that am really wired with some sorts of power in Nigeria, and I fail to declare at all or truthfully, do you think the fears are baseless?
Well in all economies, there is usually the fear of very powerful and connected persons but with this VAIDS programme, it’s been made very clear that there shall be no sacred cows. Everybody is supposed to declare where they have previously not declared. Irrespective of your position in the society, you are expected to do the needful and there are serious plans underway to ensure that the full wroth of the law is thrust against any defaulter. The Minister of Finance has been very emphatic on that one. She has openly engaged all the very high net worth individuals that are 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.
If someone has a transaction on which he has paid tax, and you are coming six years after to say that the transactions does not surely prove that such person has paid tax and at that time, the person who paid does not have papers or prove of the payment. How are you going to address such issues?
Well, if the person doesn’t have documentation, certainly the tax authorities have documentation. We have records of all tax payments by all individuals going back so many years as you know we are primarily electronic here and we have all information. It’s not a case of hard copies of documents and receipts and loads and loads of filed in the archives. At the touch or a button we can see your tax history if you have paid and what you have declared. So in the case of that kind of person, if it’s somebody who did government contract, he is subject to withholding tax and at that time that he did the contract, in the subsequent years when he was filling his returns he ought to have declared his full income and then the tax authorities will check out. It’s like an advance tax payment where some amounts is withheld from your income. So what we are saying now is, declare the whole income and then you will get the credit for the withholding tax early met. Likewise when you are now coming clean and you are declaring the whole income, the taxes that you paid in those years is set off against what is been calculated for you. So it’s a win-win situation for everybody. The documentation is there already.
Earlier on you enumerated some couple of challenges about VAIDS programme, still emphasizing on the fact that after march, what happens and in respect to building up the tax net and raking in tax payers and enlarging the tax base, we see that you have engaged some other strategies like the e-payment for tax payers convenience. It’s a good initiative but are there other similar strategies to encourage people to continue paying their taxes even after the VAIDS programme?
The need to enumerate taxpayers and thereby increase the tax base is always clear, the biggest strategy that we have on that is advocacy and enlightenment. There is hardly any other day that you look at newspapers and you won’t see some message or the other talking and advocating about VAIDS and people paying their taxes. We have on our social media. We are putting out daily articles and photographs and all sorts of media to encourage people to register and pay their taxes. There are other things that are in place, any business with any ministry department or agency in Lagos state, you must show your tax compliance. If you want to build a house, you must show evidence of tax compliance. If you want to transact on properties, you definitely must show it. In some government hospitals, before you are attended to, you must show evidence. There a lot of strategies that are out there. Some are constitutional.
Everybody who opens a new bank account, the banks are mandated to give us information and they do give us that information and what we than do is, we put them in the tax net and we reach out to them to come and properly complete their registration. So hopefully also, under VAIDS who ever that has not paid anything at all before is also encouraged to pay tax but with the statistics, most of the people who have actually come to declare actually have taxpayer ID already because they had registered at one point or the other. So constantly, there is no meeting that we have here that we don’t consider the issue of enumeration. So it’s a continuous exercise for us and even after VAIDS it’s going to help us greatly. One other thing to we also on our own part even before VAIDS, we also mind our own receipts. When I say receipts, I mean people who have paid certain tax for certain services. Like we get all the data from land use for instance, so if you add property and you have been issued a land use bill, we get the information here and we match it with your tax record likewise people who buy motor vehicles, we get all the statistics from motor vehicle agents. Once you buy a vehicle, we are sort of integrated and we can get that information so also people who are paying one sort of withholding tax or the other, we are also able to access such data and match it to tax payers’ records. So it’s a continuous strategy. Even if LIRS wants to engage you for anything, first thing we check is whether you are already in our tax net. We sleep, dream and wake and think of continuous enumeration.
What is the extent of tax compliance?
Well the extent of tax compliance is still quite low. We have about 5 million tax payers registered with us. Lagos is supposed to have within 20 million. The state assumes it’s 22 million and of this, we have an estimate of 8 million minimum taxable persons. A taxable person is anybody whose engaged in an economic activity. The level of compliance is quite high compared to many other states but we still have not reached where we want to be and this is largely because of the informal sector. The informal sector is the biggest problem for us. For example, in South Africa, you get your tax ID from when you were born as your birth certificate is being issued, you are also issued a tax ID and that is the tax ID you are going to use for life and by that, you are within radar and you are monitored. But in Nigeria, it’s not as easy as that. In the informal sector, we have people who are highly mobile in the sense that they change residence so often and many of them don’t probably have bank accounts and a lot of them are involved in activities where they are paid on a daily basis and many of them are paid cash and that keeps them beneath the radar. Over time and with everybody embracing it, its getting more and more popular to have bank accounts and payment cards which is also why the Governor of Lagos state, Akinwumi Ambode, has said that going forward, all payments coming to the state must be done electronically. And the positive side of that throws up more economic activities.
Tax administrators in Nigeria try to sell to Nigerians that often times, that the foreign countries we crave to visit where built on taxes which Nigerians don’t doubt but they also retouch that the squalid service delivery here is a disincentive to tax payment. Are there arguments confounded?
Well you have to listen and respect that argument but first and foremost it’s not applicable in every state. Why is TANS tax administration a big success story? It’s because apart from the efficiency involved, within tax administration, our governors we have been endowed with very excellent leaders in the state. Their works sells the story even for us tax administrators. There is a lot of work provided. There are projects going on if you follow the good works of our governor. There is a huge infrastructural gaps in Lagos state. The number of people coming into Lagos is making it more difficult on infrastructure but I can understand the frustration of some Nigerians especially in the states where their governors are not really performing but its changing everywhere now. Our leaders are going to be held more accountable and when the number of projects in terms of infrastructure and provision of services are very obvious they are going to have higher collections in terms of taxes. In Lagos, it is very clear. The work of the governor is the biggest advocacy we can have. So yes I agree with you. So people have the perception that their money will not be put to good use but my response to that is that if you do not pay your taxes, resources cannot not be mobilized for economic development. So who are going to wait for first? The governor who is going to spend very little to do nothing or is it you citizen who should try and perform your civic responsibilities and create a pool of funds for the governments to invest in the economy. But on our own part we are encouraging all Nigerians. It’s not a favour but a civic responsibility and obligation. Everybody is expected to pay their taxes.
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