(New Telegraph) -- As part of measures to combat tax evasion perpetrated through foreign investment by Nigerians, the Federal Government recently signed legislation on offshore assets -Voluntary Offshore Assets Regularisation Scheme (VORS 008),–which is seen as another source of revenue.
There isn’t a comprehensive list on hidden offshore assets for Nigerians. Taxes expected to be paid to government on offshore assets are currently outside tax net.
A new tax regime, Voluntary Offshore Assets Regularisation Scheme (VORS 008) is now on ground to fill this gap.
Coming barely one and half years into the introduction of Voluntary Assets Income and Declaration Scheme (VAIDS), VORS, signed last week by President Muhammadu Buhari, underpins the determination by the current administration to collect every dime due to it.
More importantly, the new legislation, which became effective Monday October 8, 2018, aptly fits into the popular expression of ‘no hidden place for tax evaders.
Besides being yet another revenue source for the government, the new legislation aims at taming illicit financial flow.
For now, detailed information on modus of operandi of the new tax law is being awaited.
Combatting illicit financial flows
Nations are mindful of sources of funds flowing in and out of their shores.
Essentially, this is to prevent laundering proceeds of illicit funds. Proceeds of financial crimes are laundered in various forms.
The easiest way is by funnelling illicit proceeds for property acquisition.
Sparingly, too many proceeds of illicit funds are deployed in establishing business ventures or diverted into acquiring luxury items.
Blessed with a huge population in excess of 180 million people, Nigeria remains a fertile market and one of the easiest targets for laundering illicit proceeds.
A classical example of illicit funds laundering and denial was narrated recently by Executive Chairman, Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler, in Abuja at African Union high level panel on illicit financial flows from Africa.
The Abuja event had Chairman, African Union High Level Panel on Illicit Financial Flows (IFF) from Africa, and former South Africa Presiudent Mr. Thabo Mbeki, in attendance.
Fowler told his audience of a case of 114 companies that feigned ignorance of land allocated to them.
Surprisingly, he said their claim of ignorance was flattened by the AGIS, the Federal Capital Territory agency in charge of allocating plots in FCT, Abuja.
The agency, FIRS boss said, confirmed the ownership of all the cases referred to them and concluded that “we will soon hand these cases over to the Attorney General on the way forward.
“We also concluded the exercises in Lagos; we have about 5,000 notices served right now and we’ve received responses from 1,346 and we now have 610 that are now filing their tax returns, and those that have paid are 189.
“The main sectors of industries that are involved in IFF and under remittance and non-remittance of taxes are multinationals, financial institutions and oil and gas companies. Those three sectors alone account for close to 70 per cent of the unremitted taxes,” he added.
Mbeki, who is the Chairman, African Union High Level Panel on Illicit Financial Flows (IFF) from Africa, said the continent lost about $80 billion annually to illicit financial out flows and called for a united response to put an end to it.
He said the AU needed to act on the matter to retain resources in the continent and not just highlighting the problem.
”Nigeria is very important in this regard because the matter is being taken up very consistently and very openly by the government of Nigeria including the president.
“We want to be able to produce a report like that even to inspire the other African countries to do the same because it’s only that way we are able to reduce these outflow. It’s because of the practical actions we take not the speeches we make.”
“We’ve not had very good response from the member states of AU about what they are doing to implement decisions that they took themselves in January 2015.
“The overwhelming majority of governments in the continent are, in principle, very keen at implementing these recommendations to stop these illicit financial outflow because it’s a very practical matter.
“If we are able to retain the resources within the continent, then we are better able to address our development challenges- and everybody recognises this,” said Mbeki.
VORS to the rescue
The current administration makes no pretence about commitment to economic diversification from oil to the non-oil sector.
Attention is more on tax, which has become a dependable source of funding governance.
The renewed vigour to rake more revenue from tax sources is rooted in the belief that with a very low six per cent Gross Domestic Products (GDP) to tax, Nigeria is among nations in the lowest rung of the ladder in terms of tax generation.
South Africa, Kenya, Egypt have robust tax complaint base. The current management at FIRS is changing the Nigerian tax narrative for the better.
The agency is currently raking more taxes than it ever did in the past due to series of reforms aided by technology.
While an average small tax payer is compliant, Nigeria billionaires with huge income and hidden assets stacked offshore evade tax payment.
To correct the imbalance and make offshore asset owners tax compliant, President Muhammadu Buhari approved the Executive Order last week.
The motive of the new law is to fight money laundering and tax evasion.
Senior Special Assistant on Media and Publicity to the President, Garba Shehu, in a statement, said Nigerian taxpayers, who have offshore assets and incomes, would within a period of 12 months declare those assets and pay taxes on them.
Penalty, benefits of compliance
The new legislation creates room for voluntary compliance.
In essence, a defaulter that acts within compliance period is entitled to some mileage including but not limited to total drop of accrued penalty.
Defaulters that voluntarily complied within given period derive specified benefits.
According to the details, any taxpayer, who truthfully and voluntarily complies with the conditions of the scheme, pays a one-time levy of 35 per cent on the total offshore assets or pays all outstanding taxes, penalties and interest after forensic audit of their offshore assets and income, shall obtain immunity from prosecution for tax offences and offences related to offshore assets, among others.
Equally, failure by any defaulting taxpayer to take advantage of this scheme shall, at the expiration of the scheme, result in investigation and enforcement procedures concerning offshore assets anywhere in the world pursuant to information now readily available through automatic exchange of information between Nigeria and foreign countries.
To ensure proper and seamless coordination of the new tax regime, an external office is in pipeline.
The Federal Government was said to be perfecting arrangement for VOARS office outside of Nigerian shores.
According to the report, “in accordance with the new order, the Federal Government, through the office of the Attorney-General of the Federation and Minister of Justice, will set up a VOARS office in Switzerland for all categories of taxpayers, who have defaulted in the declaration of their offshore assets, payment of taxes due and collectible subject to the fulfilment of the terms and conditions as stipulated in the order, or any other subsequent complementary regulations that follow.
“To avoid the abuse of this process, the Federal Government makes it clear that the scheme is open to all persons, entities and their intermediaries holding offshore assets and are in default of their tax obligations in any way, including those who are not already under investigation by law enforcement agencies in Nigeria or any other country and have not been charged with any crimes including theft of public funds or obtaining offshore assets through corrupt practices.”
Signing the order, President Buhari noted that under the Nigerian law, every citizen had the duty to declare his or her income and assets and pay taxes on them but regretted that this, in most instances, had not been the case.
Detailed information on the new tax regime is yet to be available in the public domain; the new tax scheme, no doubt, will help in facilitating regularisation of offshore assets linked to Nigerians. VORS 008 is another goldmine for the government that has just evolved.