Decades of overdependence on oil, which accounts for about 70 percent of Nigeria’s revenues, insulated the Federal Government from the colossal loss of potential revenue accruable from appropriately taxing the non-oil sector of the economy. The tax amnesty scheme, tagged Voluntary Asset and Income Declaration Scheme (VAIDS), acknowledges as well as seeks to redress this situation in some ways, apparently nudging Africa’s most populous nation on the right path.
The tax amnesty runs from July 1 to March 31, 2018.
In the speech that launched the initiative on July 1, Yemi Osinbajo, then Acting President, pointed to the poor state of tax compliance in the country.
Quoting figures from the National Bureau of Statistics (NBS), Osinbajo noted that there are 69 million taxable adults in the country but only 14 million are in the tax net. Of these 14 million in the tax net, only 214 people pay tax of N20 million or more annually and another 900 pay N10 million or more annually. Majority of those who pay tax live in Lagos, which also has the highest tax compliance rate in the country.
With global oil price remaining below $60 per barrel in 2017, Nigeria is hard pressed to re-evaluate its attitude towards taxation. This will bring about a renewed sense of commitment to the social contract. When citizens pay tax, they pay attention to what the government does with the funds.
Beyond this, the fiscal benefits of tax payment are huge too. Nigeria’s tax-to-GDP ratio, at just about 6 percent, is one of the lowest in the world. Neighbouring Ghana has a tax-to-GDP ratio of 16 percent.
Nigeria can do better than what it is doing currently in terms of tax collection if only it puts in more effort in the right direction.