As the March 31st deadline for the Voluntary Assets and Income Declaration Scheme (VAIDS) approaches, a review of the importance of the scheme’s “Project Lighthouse” has become important and even more important is an exposition on the importance of this project in the fight against tax evasion and corruption in the Nigerian taxing system.
As part of its objectives, VAIDS is saddled with the responsibility of increasing the number of taxpayers and raise revenue for the Government.
The taxpayer also benefits, as there will be no interest on overdue tax, no audit investigation, no prosecution for tax offences, and no penalties for willful declaration.
How “Project Lighthouse” will help the process of taxing efficiently
Commenting on the importance of Project Lighthouse, Hamzat Ayodele Zubair, Chairman, Lagos Inland Revenue Service (LIRS), declared that the project will make information regarding taxpayers available virtually so as to facilitate taxing efficiently.
“Project Lighthouse has to do with data mining. We are looking at several sources of information and trying to develop and bring out certain data on all taxpayers. For instance, the Nigerian Financial Intelligence Unit (NFIU) has information on all payments above N10 million. This means all the people that have had transactions in multitudes of N10 million are known”
He also revealed that State land registries would release data on the acquisitions of land in confidentiality and that all information would only be processed by a specified level of people.
Zubair emphasized that the availability of information would facilitate the quick identification of tax evaders and would provide a platform to ensure efficient and fair taxation on the citizenry.
For Nigerians with assets and money abroad, Zubair said the Automatic Exchange of Information (AEoI), to which Nigeria is signatory, will make information on wealth available even without a formal request.
“Countries like UK, UAE, USA, France and Germany are all signatories to this. They are going to compile registers of Nigerians, who own properties and have big bank accounts in their jurisdictions. These will be handed over to the Federal Government for access to information on spending patterns and lifestyles.
“Now, the access to information will enable us to ask questions. What was the source of income through which you acquired these assets? Were those sources taxed? If those sources were taxed, they will not be subjected to further taxes. If you are able to establish that you made all the money in Nigeria and transferred it abroad to buy assets, then, we are going to subject those amounts to taxation in Nigeria.
“Also, if you have huge balances in your accounts abroad, we are going to ask questions. What was the source?
“If the source was Nigeria or elsewhere, we are going to ask if it was taxed. Even if you earn income in abroad, as long as you are resident in Nigeria, you file your taxes here. And it also subject to Nigerian tax laws. That way, we are going to be able build up data on taxpayers with which we can profile them for the unpaid taxes.”
Zubair explained that the Lighthouse project will provide the umbrella body under which information related to eligible taxpayers would be processed to ensure effective and judicious taxation in the country.
VAIDS and the importance of instituting fairness in the taxing system
In the past, the taxing system in the country has been criticised for placing heavy taxes on the low-income earners and small and medium scale enterprises and light taxes on large scale companies and high-income earners and with the birth of the VAIDS’ Lighthouse system, which primarily aims to target the wealthy and enforce judicious payment of taxes, these criticisms have been replaced with ambivalence.
On the one hand, there is a sigh of relief on the part of the small and medium scale entrepreneurs and small income earners, and on the other hand, there is apprehension based on the fact that the Lighthouse program is very specifically designed to target a particular demographic.
As a result of this, it is very important that the scheme is held accountable to fairness and judiciousness in the discharge of its duties and should be non-partisan as much as possible, so as to avoid politically motivated witch-hunts in the administration of taxes.
In Comparison: Tax policies in other Countries
The American tax system in a simple illustration is demonstrated in an article published in The Washington Post;
The IRS levies a tax rate of 10 percent on your first $9,525 of income, 15 percent on $9,525 to $38,700, 25 percent on $37,950 to $93,700, and so on.
Business Insider’s A Beginner’s Guide to America’s Tax System explains it thus:
“All money you make during the year is considered “income,” no matter how you make it. If you work at a job for wages, that is income. If you win the lottery, that is income. If you find a twenty-dollar bill on the street, you’re supposed to declare it as income, too.”
Coming down to Africa, Ghana structures her tax policy thus:
Corporate Tax: This is the tax paid by companies on their profits in the year. The tax rate is 25%.
Personal Income Tax: Self-employed persons are required to pay Income tax at graduated rates in four equal instalments. The current Personal Income Tax rates took effect from January 2016.
Pay As You Earn (PAYE): The PAYE contributions are withholdings from salaries of employees in order to satisfy their income tax responsibilities. The PAYE is computed with the Personal Income Tax rates.
The Ghanaian tax policy is a lot more similar to the Nigerian tax policy in its structure. The Nigerian tax policy is structured thus:
Tax on Individuals
Personal Income Tax: This form of tax is imposed on the income of all Nigeria citizens or residents who obtain their income in and outside Nigeria.
Development Levy
This is a flat charge imposed on every taxable person typically within a State.
Tax on Companies or Corporate Entities
Companies Income Tax: This tax is imposed on the profits of all corporate entities who are registered in Nigeria or derive income from Nigeria, other than those engaged in petroleum operations.
Petroleum Profits Tax: This is imposed on the profits of all corporate entities that are registered in Nigeria or who get their income from oil and gas operations in Nigeria.
Education Tax: This form of tax is imposed on all corporate entities registered in Nigeria.
Technology Levy
This is imposed on selected corporate entities such as telecommunication companies, internet service providers, pension managers, banks, insurance companies and other financial institutions within a specified turnover range.
Tax on Transactions
Value Added Tax: This tax is imposed on the net sales value of non-exempt, qualifying goods and services within Nigeria.
Capital Gains Tax: This is imposed on capital gains gotten from sale or disposal of chargeable assets.
