Nigeria to Begin Post-VAIDS Enforcement

Introduction:

In a Press Release dated July 12, 2022 and captioned: “Post-VAID: JTB, FIRS Commences Full-Scale Enforcement on Defaulters” (the Press Release), Nigeria’s Federal Inland Revenue Service (FIRS) announced that it would, in collaboration with Nigeria’s Joint Tax Board (JTB), “immediately commence a “full-scale Enforcement Exercise” on defaulting taxpayers.” Essentially, FIRS and JTB intends to begin the prosecution of taxpayers who did not take advantage of Nigeria’s Voluntary Assets and Income Declaration Scheme (VAIDS, or the Scheme).

Revisiting VAIDS:

As you may recall, VAIDS was a product of Nigeria’s Federal Executive Government’s Executive Order No. 004 of 2017, issued in April 2017 by then Acting President, Professor Yemi Osibanjo (the VAIDS Order). The Federal Executive Government had by the VAIDS Order directed the Federal Ministry of Finance to set up the Scheme. The Scheme essentially encouraged and incentivized voluntary compliance of back taxes up until 6 (six) years (2011 to 2016) before the date of the Order. The amnesty period which was initially designed for 9months, did not terminate until June 2018, thereby allowing relevant taxpayers sufficient time to regularize their tax positions with both the FIRS and States’ Internal Revenue Services or Boards (SIRS). The JTB, which is a statutory organisation of the FIRS and SIRS was also actively involved in sensitizations of VAIDS, while it lasted. It may be recalled that a Memorandum of Understanding was signed between the FIRS and the SIRS for the implementation of the Scheme.

VAIDS was designed to encourage voluntary declaration of income and payment of outstanding tax liabilities. It was touted as a Scheme to increase Nigeria’s tax to GDP ratio from 6% to 15%, broaden the national tax base, curb non-compliance with existing tax laws, and discourage the use of tax havens. The Scheme applied to all taxable persons or bodies under Nigeria Law and covers the following taxes: Companies Income Tax; Personal Income Tax; Petroleum Profits Tax; Capital Gains Tax; Stamp Duties; Tertiary Education Tax; essentially, all taxes administered by the FIRS and SIRS. Compliant taxpayers who fully and voluntarily disclosed as well as paid their outstanding tax liabilities enjoyed reliefs such as immunity from prosecution for tax offenses; immunity from tax audit; waiver of interest; waiver of penalties; and the option of spreading payment of their outstanding liabilities over a maximum period of three years.

It may appear that the success story or otherwise of the VAIDS project had hitherto been embroiled in the operational or functional processes of the relevant tax authorities in the circumstance that up until the recent Press Release, not much was ever heard again on VAIDS after the expiration of the amnesty period. It is also arguable if VAIDS significantly increased tax compliance in Nigeria in the circumstance that the Press Release alludes to the fact that the rate of tax non-compliance by businesses remains as high as 71%.

How Much Can the Proposed Enforcement Exercise Correct?

The amnesty period contemplated by VAIDS, 2011 to 2016, is now 6 years past, at the latest. Recall that VAIDS impliedly assumed compliance from the date of the VAIDS Order as the amnesty extended to the 2011 to 2016 back years. The Press Release appears to have missed this salient point as it is worded with the view to punish nascent tax defaulters, rather than those with unresolved tax obligations in the VAIDS amnesty period. The promise of successful prosecution may arguably be bleak unless the charges in question are appropriately presented as criminal charges under the extant tax laws, rather than a simple back duty drive. This is within the context that save in the circumstance of fraud and willful neglect, the tax authorities may, in the case of most of the high-revenue earning taxes, not be able to go back past the statutory 6 years. In simple language, a routine back duty drive initiated in 2022 may not extend past 2016.

The VAIDS Order was made subject to extant tax laws which the tax authorities are more than likely to strictly uphold in the threatened enforcement exercise drive. Simply, those that did not take benefit of the shield that VAIDS provided now must face the sword of the tax laws. How sharp the sword of the tax laws is, with regards to the VAIDS amnesty period is another question. Perhaps the real threat of enforcement should be appropriately directed at tax non-compliance generally, without watering it down with reference to, an arguably poorly executed VAIDS. The jury is still out on the last clause.

Please do not treat the foregoing as tax advice as it is only an expression of our Tax Information Service. All enquiries should please be directed to our TaxThursday Desk at resources@taxaide.com.ng; +234 700 TAXAIDE or any of our following personnel:

     Adeola Adefuye Associate a.adefuye@taxaide.com.ng  
           Bidemi Olumide Partner b.olumide@taxaide.com.ng  

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