Monday, February 05,
2018/ 09.28AM / FBNQuest Research
cited by the federal finance ministry show that there are 14 million taxpayers
in Nigeria, of which 13.4 million have their taxes deducted at source. Those
paying some tax voluntarily represent less than 1% of the economically active
revenue inflows into the federation account amounted to just 2.3% of GDP in
2016, and total inflows 5.0%. The ratios from emerging markets such as India,
Ghana and South Africa tell us that Nigeria should be managing a bare minimum
Against this background and the FGN’s
ambitious plans for the infrastructure, the authorities launched the Voluntary
Assets and Income Declaration Scheme (VAIDS) in June. The scheme covers the
whole gamut of taxes, and gives Nigerians until end-March to regularize their
tax affairs. Should they not meet the deadline, they are liable, if convicted,
to imprisonment of up five years, the payment of accrued interest at an annual
rate of 21%, penalties and possible confiscation of assets.
At its launch, VAIDS had a target to raise
at least US$1bn equivalent. We are not aware of any interim progress reports.
The stronger part of the two-pronged
strategy is data mining, and matching between government departments and
agencies. The FGN has employed a US household name in asset recovery to link
land registry records and tax receipts. Other areas of interest to the
authorities include bureaux de change records, the whistle-blowing scheme, data
held at the Corporate Affairs Commission, Wikileaks and the “Panama papers”,
the registration of private jets and yachts, and bank verification numbers.
We have heard extreme parallels made by
Nigerian policymakers with data matching in Ethiopia where, it is said, a
purchase in a store with a credit/debit card is captured by the tax agencies.
We are not sure that this is practicable in Nigeria or indeed many countries
with a different political tradition.
The other part of the strategy is
educational. This is long-term, and requires the state to provide services for
which the population is willing to pay in the form of taxes. Lagos State offers
the most-quoted template.
A successful follow-up by the authorities
after the deadline requires the full cooperation of the judicial system.
Another challenge for the authorities is to
convince the working population that the amnesty is really an
once-in-a-lifetime opportunity. The experience from Turkey, Indonesia and
elsewhere is that such programmes are repeated and gradually their edge in