Nigeria must grow its tax collection mechanism faster than GDP if its hope to see an increase in tax-to-Gross Domestic Product (GDP) ratio rise from its current six percent to its planned 15 percent target is to be realised, a gathering of tax experts and other interested parties put together by professional services firm, PriceWaterhouseCoopers (PwC), has said.
With a tax to Gross Domestic Product ratio of 6%, Nigeria still ranks one of the lowest in the world – compared to India’s 16%, Ghana’s 15.9%, and South Africa’s 27%. Most developed nations have tax to GDP ratios of between 32%-35% and above 20% in some other developing nations.
The PwC interactive session, held in Lagos, was organised to specifically unpack the new Nigerian government initiative known as the Voluntary Assets and Income Declaration Scheme (VAIDS).
The “Voluntary Assets and Income Declaration Scheme” (VAIDS), which was introduced by Nigeria’s federal government in collaboration with all 36 state governments, is aimed at increasing the number of taxpayers in the tax net and raise revenue for the government.
The scheme targets taxpayers who have not been fully declaring their taxable income/assets; have not been paying the tax due at all; have been underpaying or under remitting; are under a process of tax audits or investigations with relevant tax authorities; are engaged in tax disputes with the relevant tax authorities but are prepared to settle the tax dispute out of court.
Finance Minister Kemi Adeosun, a keynote speaker at the session, decried Nigeria’s low tax revenues, which has hampered sustainable revenue base and inclusive growth, but anticipates that the newly launched VAIDS is capable of correcting the nation’s poor tax contributions to GDP ratio, and as well, regularise and encourage defaulting Nigerian taxpayers to work out a flexible way to pay their tax liabilities due from the last six relevant tax years.
The scheme will also regularize their tax transactions and obtain genuine tax clearance certificate for all the relevant years without fear of criminal prosecution for tax offenses and with the benefit of forgiveness of interest and penalties.
Specifically, VAIDS is expected to increase Nigeria’s tax to GDP ratio to between 10% and 15% from the current state, broaden the national tax base, curb tax evasion and discourage illicit financial flows.
Ayo Subair, executive chairman, Lagos State Inland Revenue Service said: “We have seen the positive impact taxpayers’ money can make at the state level in terms of social services, administration of government and infrastructure development. So we are fully supportive of this initiative and we are ready to assist as many taxpayers who would like to take advantage of the Scheme to remediate their tax affairs,”
Head of Tax at PwC Nigeria, Taiwo Oyedele, explained that the payment of taxes is not easy anywhere in the world, but necessary for the sustenance of society for everyone.
“Paying taxes is not particularly easy anywhere in the world for anyone who has expended time, energy and other resources to earn the income.
However, it is necessary for there to be an organised society for the benefit of all. We organised this session to discuss the background, design, and structure of the Voluntary Assets and Income Declaration Scheme (VAIDS), key objectives, legal framework and the step-by-step process for declaration, remediation, and resolution.
“We also highlighted the benefits and assurances available under VAIDS and post-implementation enforcement and sanctions”, he said.
PwC Nigeria Country Senior Partner, Uyi Akpata said the interactive session and the renewed interest and policy direction on taxation is a positive development for the transformation of the Nigerian economy, as the over-reliance on oil as the main source of government revenue was not sustainable to build a viable economy.
He maintained that PwC has over time advocated various initiatives to broaden the tax base, reform the tax laws, and improve the ease of paying taxes.