VAIDS ends two months today, how to sustain its relative success
Two months to end of the Voluntary Assets and Income Declaration Scheme (VAIDS) designed to shore up government non-oil revenue by growing the tax base and ensuring tax compliance, taxpayers and other stakeholders would need to play conscious role to make this effective.
VAIDS is an initiative designed to encourage voluntary disclosure of previously undisclosed assets and income for the purpose of payment of all outstanding tax liabilities.
The scheme is expected to help expand Nigeria’s tax base and improve the low tax to Gross Domestic Product (GDP) ratio from the current 6 percent to between 12 percent and 15 percent in the first instance “and so far N17 billion has been result of this initiative from federal taxes” Tunde Fowler, Executive Chairman, Federal Inland Revenue Services (FIRS) said at Nigeria’s 2018 Economic Outlook, organised by Deloitte, Nigeria’s oldest indigenous accounting firm.
To sustain this momentum, stakeholders need heightened commitment. On one hand, responsible employers are expected to deduct pay-as-you-earn (PAYE) tax from their employees’ and remit to the tax authority in the State where the employees are resident. “Employers also have a moral obligation to create awareness about VAIDS among employees and advise them to comply accordingly” Wole Obayomi, Partner and Head Tax, Regulatory and People Services at KPMG, a global network of professional firms providing Audit, Tax and Advisory services said.
On the other hand, employees are invited to disclose unearned income from investments, such as rental income, for tax purposes. “This obligation is easily overlooked, but the time has come for them to know that tax compliance is more than about PAYE tax deduction, and that income from all sources received both within and outside Nigeria must be reported for tax purposes” Obayomi said.
Another category of taxpayers to pay attention to are entrepreneurs and professionals in practice who owe personal income tax on the earned income from their business and practice in addition to unearned income from their investments. In a situation where these individuals have not clearly separated their personal financial affairs from their business, the outgoings from their business accounts to pay for their personal expenses should be taken as their minimum income for tax purposes.
Political office holders, civil servants and public servants are bound by the same rule to the extent that they can be described as employees. They must account for tax on their unearned incomes in addition to their PAYE tax obligations.
Lawyers, accountants and tax advisers, beyond complying with VAIDS in their personal affairs as professionals, they have advisory role to play in educating their clients on the compliance requirements imposed by VAIDS and the consequences of non-compliance.
Investment houses, which private equity funds, venture capital funds, asset managers, wealth managers and trustees. This is one sector where reputation management is important as the operators could suffer from association risks where their executives, investors and clients alike are found wanting in tax compliance.
Other capital market operators in addition to ensuring that they themselves are in good standing, stockbrokers, securities dealers, financial and investment advisers will be doing their clients some good by advising them to comply with VAIDS in order to enjoy the benefits of waiver of interest and penalties, and avoid the consequences of non-compliance after 31 March 2018.
To all corporate tax payers, it is time to conduct a tax health check on their tax affairs between 2011 and 2016 in respect of which they are yet to be audited and cleared by tax authorities, or in respect of which tax audits are in progress, and pay any resulting additional tax liabilities to enjoy the benefits of tax amnesty under VAIDS.
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