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VAIDS: as the third trimester approaches…

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Acting President Yemi Osinbajo signs the Voluntary Assets and Income Declaration Scheme (VAIDS) in Abuja on Thursday June 29, 2017


The third trimester of any pregnancy is usually filled with anticipation as prospective parents and loved ones eagerly look forward to the expected outcome. It is not unusual for the parents to place bets on who the unborn child would look like or, in some cases, what the gender is. Similarly, with the Voluntary Assets and Income Declaration Scheme (VAIDS) approaching its third trimester, the question on most people’s minds is what the outcome would be. Would it be a success or failure? What would be regarded as success – raking in billions of Naira during the 9-month period, broadening the tax net and changing the attitude to tax, imbibing the culture of trust or all of the above?

On 29 June 2017, then Acting President, Prof. Yemi Osinbajo SAN, by way of an Executive Order, introduced VAIDS. I was privileged to be one of the guests at the State House Banquet Hall, Abuja on that day and I remember, vividly, the atmosphere in the hall. It had nothing to do with the characteristic eloquence displayed by the Acting President while rendering his speech, neither was it about the melodious tunes produced by the Nigerian Army band during a rendition of the National Anthem, nor was it about the star studded event made up of State Governors, Ministers, government functionaries etc. No, it had nothing to do with any of these things. Rather, it was the collective feeling of hope, of oneness and unity, of belief in Nigeria’s future success. Looking round the hall that day, I did not see any Igbos, Yorubas or Hausas. I did not see any Moslems, Christians or idol worshippers. All I saw was a group of people united in the common belief that VAIDS would be a vehicle of nation-building restoring Nigeria back on track.

What is VAIDS anyway? VAIDS is designed to be a win-win situation for both government and governed. Citizens need the government to provide basic amenities – good healthcare, affordable education, effective transportation systems, security, power etc. On the other hand, government needs money to provide these amenities. In an attempt to bridge both parallels the government introduced VAIDS where it promised not to prosecute tax defaulters (individuals and companies), nor audit them. It also promises to waive all interests and penalties while guaranteeing a flexible payment plan, up to 3 years, for the principal tax. To enjoy these promises, citizens are expected to disclose all previously undisclosed assets and income and pay all outstanding taxes thereon for the preceding 6 years from 2011 to 2016. Taxpayers who pay taxes due before 31 December 2017 would enjoy all these promises, those who comply after this date would enjoy all the promises but would be expected to pay, in addition to the outstanding principal tax, interests on the outstanding tax.

Like most Nigerians in the Banquet Hall I believed, and still do, in the objectives of a sound tax system. If both parties played their respective parts, the government would have no excuse but to provide the basic amenities as citizens would be emboldened to collectively and legitimately demand of government – “How are our taxes being spent?” In other words, a social contract would have been created where both parties are duty bound to fulfil their respective obligations. This is the whole essence of VAIDS.

Implementing VAIDS was never going to be easy. There is a general notion of distrust between government and governed. Most taxpayers believe corruption in public sector is rife and not enough is being done to fight it. They also believe taxes paid are mismanaged and not transparently spent. They believe that corrupt government officials embezzle tax revenue to sustain their extravagant lifestyles. Do taxpayers have a legitimate claim? Maybe, because many Nigerians fix their own roads, dig their own boreholes, provide electricity to power their homes and businesses, pay for their own security, fix street lights etc. It also does not help that details of top public officers’ salaries are not publicly available. For instance, some State governors live ostentatiously while salaries of workers are not paid as and when due – in some cases over 6 months – same with pension as there have been reports of pensioners dying while queueing for their post-employment entitlements. The healthcare and educational sectors are almost moribund while public servants and their family members attend schools and receive healthcare abroad.

On the other hand, government accuses citizens of evading and/or avoiding taxes. They claim many high net worth individuals do not pay their fair share of taxes, there is a high prevalence of tax avoidance/evasion in the informal sector so government cannot provide basic amenities because citizens do not pay the right amount of taxes. The lack of trust has made it convenient for one party to say we cannot provide basic amenities because we do not collect sufficient taxes and the other party to say we will not pay tax because we have not seen the effects of taxes previously collected.

Asides the issue of trust, there are also practical challenges in implementing VAIDS. Because it also applies to individuals, its success depends largely on the cooperation of the tax authorities of the 36 States. In the early stages of implementing VAIDS, there were instances of some State tax authorities saying they were not aware of the details of VAIDS. One of the recommendations proffered while designing VAIDS was that there would be a VAIDS desk in at least one tax office in every State to provide support and information to compliant taxpayers. However, there were instances where neither taxpayer nor tax authority knew where the VAIDS desk was domiciled in a State. Other challenges are technical in nature and result in inability to complete and submit a VAIDS form online as well as lack of a dedicated helpline for specific information.

There has also been challenges arising from tax administration. In some instances, tax authorities have prevented taxpayers from complying with VAIDS for one reason or the other even though VAIDS is, according to the Executive Order and information on the website, available to all categories of taxpayers.

The real success for VAIDS is not the amount of money that would be collected by government in the short term. Rather the real success would be inculcating a culture of mutual trust between the government and governed. Trust characterized by accountability and transparency across all levels of government. Also all taxpayers should imbibe the culture of paying the right amount of taxes at the right time. This is a civic obligation which gives taxpayers the moral ground to collectively challenge the government where there are cases of financial impropriety.

As we approach the final trimester, I enjoin the government to lead by example and set the tone for inculcating trust. Funds received from VAIDS could be earmarked to crucial sectors of the economy such as education, healthcare to win the trust of taxpayers. This would invariably result in an improved tax culture, broadened tax net and increased tax revenues thus satisfying all the objectives of VAIDS. Hopefully, it would shift the onus to taxpayers to comply with laudable initiatives like VAIDS. During my engagement with taxpayers many of them expected government officials to take the lead by declaring previously undisclosed assets and income. Lack of government participation in this area has contributed to taxpayer hesitance – if public officers do not comply why should they?

Folajimi O. Akinla is a Manager and Tax Lawyer at PwC Nigeria. He specialises in Tax, Transfer Pricing, Tax Dispute Resolution and Private Wealth Management.Visit our tax blog for in-depth analyses, unique insight and superlative perspective on tax matters: www.pwc.com/nigeriataxblog. Subscription is free!


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