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Diversification of the economy: Tax as a pathway to economic growth

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Ayobami Akanji

Taxation is the price which civilized communities pay for the opportunity of remaining civilized – Albert Bushnell Hart

Nigeria has always been the victim, if she wasn’t being suffocated to death by bad and directionless leadership, she would be exploited by tax evaders. Or a very matching combination of the two that either way, leaves her helpless.

She is always the victim, when a saviour comes to claw her from the jaws of those who’ve sucked her for breakfast, butchered her for lunch and planned how big a cut they will take from her shoulder for their dinner, you should be ready for one hell of a dog fight – they are regrouping again on how to devour her.

Tunder Fowler, the Chairman of the Federal Inland Revenue Service (FIRS) exposed what really should make the heart of every Nigerian cringe. He said that over 6,772 billionaires, with between 1-5 billion naira in their accounts are defaulting in their payments of taxes, some of these billionaires actually live and do business here, making huge profits.

According to the FIRS, there are 31,395 records of companies and businesses obtained from 23 Banks with individual turnover of between N3 billion and over N5 billion who have not paid a kobo as tax in the last three years.

A patriot is the one that does whatever it is that will advance the interests of his country. A bad citizen only thinks of how his country can advance his own interests. The Buhari administration rode on the wave of resetting the country by doing things differently. Shrinking oil prices, debts servicing, recurrents expenditure and other commitments are limiting the scope of work the government plans to do. He has, as always, talked on diversifying the economy, making other aspects of the economy as viable as oil is. He has also committed to sourcing funds from places anew and one of such places is the tax.

It is important to note that Nigeria has one of the lowest tax to GDP ratio globally. Knowing the importance of tax in growing the economy and building the requisite infrastructure, in June 2017, then Acting President, Yemi Osinbanjo, signed into law, the Voluntary Actions Income and Declaration Scheme (VAIDS). Defaulting taxpayers were thus given a window to regularise their tax status relating to previous tax periods and to pay any taxes due. This is in exchange for, according to what they have on their website “forgiveness of overdue interests and penalties and the assurance that they do not face criminal prosecution for tax offences or tax investigations” .

Signs of successes have been apparent as, according to Fowler, government has recovered about 30 billion naira under this tax amnesty scheme. He also said, in his capacity as the chairman of Joint Tax Board, that the numbers on the national taxpayers’ database has risen to over 19 million in 2018 from the 14 million it was in 2016.

What a bold step. What an achievement!

However, it is interesting to see the silent revolution going on to ensure a holistic diversification of the economy. One key source of revenue, which was not fully tapped in the past, but which the current leadership is ensuring from is unearthed and is fully harnessed for the benefit of all, is tax.

Conversely, the sum of N2.983bn has been generated from payments on demand notices placed upon property owners who are being assessed on their turnover. 653 out of 2,672 of such non-filers are now filing. A total of N47.5bn, $32.8m and N225 billion has been collected from 2016 till date.

Realising the efficacy of this scheme amongst other reasons that may include closing doors on impunity, the Buhari administration launched the Voluntary Offshore Assets Regularisation Scheme (VOARS). It is simply an order for Nigerians to do the right thing done all over the world; declare and pay tax on your Offshore assets.

It is very similar to (VAIDS) signed by the VP with the only difference being the offshore assets. The scheme was set up to regularise offshore assets and tax status, and also to ascertain their outstanding level of tax liability. With an assessment period of 30 years, it gives a 12 month window for tax defaults to come forward and clear the burden they’ve accumulated. During this window, defaulters that choose to voluntarily regularise their tax status for all the relevant years will pay a one-time levy of 35% of their offshore assets in lieu of all outstanding taxes, penalties and interest.

Another option readily available for those who want to voluntarily regularise their tax status is for them to access a specific government disclosure facility based in Switzerland. Those that comply will naturally enjoy immunity to prosecution and enjoy waivers on interests and penalties. Defaulters will be easily spotted out as the automatic exchange of information between Nigeria and foreign countries goes into full effect. They will also be obligated to pay 100% of all interests and penalties arising from the principal sum that has piled up for the period of 30 years. It’s like a scheme designed to save defaulters from running into trouble and also to increase the revenue inflow to the government coffers for infrastructural development.

A government that has plans should have the necessary fundings to execute them, else they remain what they are – plans. Nigerians are advised to key into this scheme. Take advantage of this period of grace and wriggle out of the law’s tentacles because when it comes knocking at your door, even if you don’t open, it comes in and makes itself comfortable. The law always takes it course. God bless Nigeria.

Akanji is a political strategist and writes from Abuja, he tweets on @Ayooakanji

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