VOLUNTARY ASSET AND INCOME DECLARATION SCHEME AND ECONOMY DEVELOPMENT IN NIGERIA
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VOLUNTARY ASSET AND INCOME DECLARATION SCHEME AND ECONOMY DEVELOPMENT IN NIGERIA
VOLUNTARY ASSET AND INCOME DECLARATION SCHEME AND ECONOMY DEVELOPMENT IN NIGERIA CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Recently the Nigerian economy has been experiencing a
plethora of problems, which could be attributable to the challenge of dwindling
revenue. It has therefore become pertinent for our economic managers to go back
to the basics-tax revenue generation. Nigeria, being a mono-culturally
dependent economy on oil revenue, fluctuations in oil prices in the
international market, which is obviously beyond the control of the government,
naturally exposes the economy to risks and volatility. By implication, the
revenue gap created by consistent budget deficits are often financed with
borrowings and aids (external and internal) which makes the country’s economy
totally dependent on variables beyond its control. To cushion this, the
government recently came up with the idea of Tax Amnesty for tax evaders tagged
‘Voluntary Assets and Income Declaration Scheme (VAIDS), aimed at granting
amnesty for all who voluntarily declare their tax liability during the allowed
window of July 2017 to June 2018. Tax Amnesty (Nigeria’s VAIDS equivalent)
could be traced back to August 1st, 2006, when the World Bank formally approved
a Voluntary Disclosure Program (VDU), which was a proactive anti-corruption
investigative tool designed to uncover corrupt and fraudulent schemes that will
strengthen the institution’s capacity to prevent corruption in its operations.
The VDP allows entities, which have engaged in past fraud and corruption, to
avoid administrative sanctions. It grants such entities the window to disclose
to the Bank, all such prior misconducts and in addition to the satisfaction of
specified terms and conditions, are exempted from public debarment for
disclosed past misconduct and are assured of the Bank’s confidentiality. In
2010, the government of the US government enacted the Foreign Account Tax
Compliance Act (FATCA), to prevent and detect tax evasion and improve
taxpayers’ compliance.
Under FATCA, all U.S. citizens who own offshore assets and
foreign financial accounts were enjoined to voluntarily report these assets or
accounts to the US IRS (Ede, 2017). Their foreign financial institutions were
also advised to report their obligations to the U.S. Department of the
Treasury. As a result of this law, many US taxpayers became aware of their US
tax obligations and non-compliance as the case may be. Again in 2014, the US
initiated an offshore voluntary disclosure program that allows US taxpayers to
regularize their tax reporting and avoid criminal liability and civil penalties
(Ede, 2017). Similarly, the South African Minister of Finance on 24 February
2016 announced the introduction of a Special Voluntary Disclosure Programme
(“SVDP”). Under the SVDP, non-compliant South African taxpayers and Exchange
Control residents with undisclosed assets abroad have the opportunity to
regularize those offshore assets as well as the income derived from the assets.
It is believed that those antecedents led the government of Nigeria to adopt
VAIDS. Accordingly, in a bid to increase Nigeria’s tax revenue and to raise
non-oil tax to Gross Domestic ratio, Voluntary Assets and Income Declaration
Scheme was introduced (Deloitte, 2017).
VAIDS is a form of tax amnesty. It is a scheme that is
expected to bring lots of benefits to Nigeria as a country on one hand, and to
the tax payers on the other hand. On the benefits to Nigeria, VAIDS is expected
to: provide an opportunity to increase the rate at which Nigerian Citizens will
comply with tax by creating awareness of tax to more Nigeria citizens,
especially citizens that are not registered under the tax authorities. It will
lead to increase in tax contribution to not only revenue but the GDP. Observers
believe that the scheme promises to increase Nigeria GDP from 6% to 15%
providing a foreseeable benefit of better GDP and a better economy. Other
benefits provided by the scheme to tax payers include, waiver of interest and
penalty, immunity from prosecution on declaration. It also presents an
opportunity to come clean and start complying (Deloitte, 2017). Obara &
Nangih (2017) studied ‘Tax compliance barriers facing SMEs and Revenue
Generation in Nigeria. They identified lack of data base and non-automation of tax
payment procedures as some of the banes of revenue generation in Nigeria. They
further identified the prevalence of cash transactions amongst Nigerian SMEs,
as another reason for the frequent tax evasion cases in Nigeria. Micah (2012),
found from his study that there exists a significant relationship between
corruption and decline in internally generated revenue. According to him as
corruption increases the decline in internal generated revenue will also
increase. Patrick & Bala (2013) found out from their study that there
exists a significant relationship between corruption and decrease in internal
generated revenue. Kiabel & Nwokah (2009) in their study discovered that
there exists a significant relationship between lack of public awareness about
various taxes to be collected by Internal Revenue Service and the decline in
IGR. VAIDS is a form of tax amnesty. The aim is to make tax payers (individuals
and corporate citizens) to voluntarily come out and to declare their income and
assets to avoid prosecution (including “naming” and “shaming”).
The amnesty window started from July 2017 to 30th June 2018-
a period of one year. VAIDS is not totally a new concept. It has been adopted
in more than 47 countries in the world including India, Indonesia, South Africa
etc. and it has yielded positive benefits in all countries. Its primary
objective was to encourage voluntary declaration of undisclosed incomes and
assets with consequential payment of applicable tax liabilities over a defined
period by companies and individuals. Abiola (2017), posits that VAIDS is a
manifestation of the new spirit of cooperative federalism in response to the
economic crisis and the challenges of diversification of the economy. Therefore
the study seeks to examine voluntary asset and income declaration scheme and
economic development in Nigeria.
1.2. STATEMENT OF PROBLEM
Recent fluctuations of oil prices in the international
market resulted in a sharp decline in oil revenue accruing to the government of
Nigeria and other oil producing majors alike. This has encouraged the
government (particularly at the federal level) to put on its ‘thinking cap’.
Its target is to encourage revenue diversification and reduce the level of
over-dependence on oil revenue. Consequently, the focus is now more on tax
revenue. In a bid to increase Nigeria’s tax revenue and to raise non-oil tax to
Gross Domestic ratio from the current level of 6% to 15% by 2020, Voluntary
Assets and Income Declaration Scheme (VAIDS) was introduced (Deloitte 2017).
The aim is to encourage individuals and corporate bodies to voluntarily declare
their hidden assets and incomes and pay the correct tax to the government. In
return the government will grant them amnesty. This is a laudable idea, in
principle. However, the study seeks to examine the voluntary asset and income
declaration scheme and economic development in Nigeria.
VOLUNTARY ASSET AND INCOME DECLARATION SCHEME AND ECONOMY DEVELOPMENT IN NIGERIA
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Recent fluctuations of oil prices in the international market resulted in a sharp decline in oil revenue accruing to the government of Nigeria and other oil producing majors alike. This has encouraged the government (particularly at the federal level) to put on its ‘thinking cap’. Its target is to encourage revenue diversification and reduce the level of over-dependence on oil revenue. Consequently, the focus is now more on tax revenue. In a bid to increase Nigeria’s tax revenue and to raise non-oil tax to Gross Domestic ratio from the current level of 6% to 15% by 2020, Voluntary Assets and Income Declaration Scheme (VAIDS) was introduced (Deloitte 2017). The aim is to encourage individuals and corporate bodies to voluntarily declare their hidden assets and incomes and pay the correct tax to the government. In return the government will grant them amnesty. This is a laudable idea, in principle. However, the study seeks to examine the voluntary asset and income declaration scheme and economic development in Nigeria... accounting project topics
VOLUNTARY ASSET AND INCOME DECLARATION SCHEME AND ECONOMY DEVELOPMENT IN NIGERIA