On the 29th of June 2017, the vice president, then as Acting President formally launched the Voluntary Assets and income declaration scheme (VAIDS). The scheme which is designed to have a life span of 9 months officially commenced on the 1st of July 2017. The implication of this is that the scheme is scheduled to end on the 31st of March 2018.
It is important that investors and taxpayers clearly understand what this scheme is all about and what is to happen at the expiration of the scheme on the 31st of March 2018. The VAIDS is a scheme designed to encourage voluntary disclosure of previously undisclosed assets and income with the intent that after such disclosure the taxpayer would make payments of all outstanding tax liabilities.
The VAIDS is being implemented by the Federal Inland Revenue Service in collaboration with the state Inland Revenue services. This scheme is coming up at a time when the country’s tax to GDP ratio has dropped so low to a paltry 6%. The federal government is therefore putting modalities in place to increase the tax to GDP ratio. It important to note that this program is not all together new. In Canada, a voluntary disclosure program similar to the VAIDS has long been in place. The VDP operative in Canada allows taxpayers to come forward and correct inaccurate, irregular and incomplete information that they have not reported during the past dealings with the Canadian revenue agency without prosecution or penalty.
In the same vein, the South African minister of finance on the 24th of February 2016 introduced the special voluntary disclosure program. The idea behind the scheme is to create an open window for non-compliant South African taxpayers and exchange control residents with undisclosed assets abroad, have the opportunity to regularize their offshore assets and the income derived therefrom. The application of this scheme ended on 31st August 2017. This was South Africa’s own way of ensuring that defaulting tax payers get a window for regularization of their tax obligations.
Singapore is also not left out of this move to vigorously increase the tax to GDP ratio. In January 2013, the government of Singapore through the Inland Revenue Authority of Singapore issued the IRA’s Voluntary Disclosure Program which provides guidance on the conditions for a voluntary disclosure to qualify under the scheme. The VDP of Singapore, just like the VAIDS in Nigeria was introduced to enable individuals, corporate organizations and taxpayers generally to voluntarily disclose their errors and omissions committed by them under the extant tax laws of Singapore. The disclosure and regularization will be done without any penalty or prosecution which ordinarily ought to follow were it not for the scheme. The interesting thing about this scheme however is that, unlike those of South Africa and Nigeria, there is no fixed time period for making a voluntary disclosure. The Voluntary Disclosure Program is applicable to withholding tax, stamp duty, goods and services tax and income tax.
One very interesting thing about the VAIDS is that, unlike similar schemes in Canada, South Africa, and Indonesia, it completely waives every penalty and interest that the tax payer ought ordinarily to face. Ordinarily, it is an offence to evade tax. Thus, tax offenders ought ordinarily to be prosecuted, but the VAIDS is now acting as an amnesty to allow the defaulters to utilize the 9 months window to regularize their tax obligations.
However, it must be noted that the waiver of interests accruing on the accumulating tax discontinues after 31st of December 2017. The implication of this is that those who were not pro-active enough to take advantage of the scheme within the first 6 months will only enjoy penalty waivers. The interest waivers will therefore not apply as they would be compelled to pay both the outstanding tax and interests.
Now, it is expedient to understand the coverage of the VAIDS.This scheme covers all taxes due and receivable by all the tiers of government. It also extends to all subsisting tax disputes between taxpayers and the relevant authorities as it affords parties a better and fast channel to resolve such disputes.
The tax authorities are now very much aware of the non-compliance of majority tax payers and as such technology has been deployed to track defaulters. International asset tracking firms have been engaged to track assets abroad. This is all in a bid to boost the tax to GDP ratio.
The major concern now will be to anticipate what the tax clime would look like when this window closes on the 31st of March. The reality is that everything goes back to status quo. All the defaulting tax payers who did not take advantage of the scheme will not be able to claim waivers. Taxpayers who have been able to utilize this scheme to regularize their tax obligations will then have to start on a new slate. Tax is a statutory obligation of every taxable citizen and business in the country and as such it goes a long way in determining the sustainability and profitability of investments and the overall net worth of the individual. Tax payers will therefore desire the best platform that would serve their financial and business interests. This is only possible when the right methods are employed with the assistance of tax experts who are able to deploy legally permitted methods to help reduce the overall tax burden of the tax payer while at the same time ensuring that he duly fulfills his tax obligations to the government.
In conclusion, the VAIDS scheme is a laudable development and it submitted that all taxpayers should key into this program while the window is still open. The government should also ensure that it makes tax collection and policies friendlier to the tax payers. Considerable improvements would be made in this regard if there is an implementation of the National Tax Policy (NTP) which was approved by the Federal Executive Council (FEC) on March 5, 2017.
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