Taxation: Banks set to release customers’ information to FG

12 min read 2,342 words 8 views

The Deposit Money Banks in the country are about installing
appropriate technologies that will enable them to submit the
information of wealthy customers and other taxpayers to the Federal
Government under the Common Reporting Standard programme, which
Nigeria signed up to last August.

The CRS, an automatic exchange of information programme, is
being driven by the Organisation for Economic Co-operation and
Development, an intergovernmental body with 35 member
countries.

The CRS, which is similar to the United States Foreign Account
Tax Compliance Act, promotes sharing of information across
borders.

The Federal Government has also signed up to the Beneficial
Ownership Register with the United Kingdom for the purpose of
driving the Voluntary Asset and Income Declaration Scheme.

The Federal Government has already directed the DMBs to release
information on the income and assets of their customers, especially
those of over 12,000 high net worth individuals, who are either not
paying taxes or have been underpaying.

This is in preparation for the government’s plan to enforce
compliance by prosecuting the high net worth individuals who fail
to settle their tax liabilities or commit to the gradual payment
after the expiration of the tax amnesty on March 31.

The Federal Government’s nine-month tax amnesty under the VAIDS
will expire in less than two months.

The Federal Inland Revenue Service and the tax authorities of
the 36 states under Joint Tax Board launched the VAIDS on July 1,
2017.

The scheme is a nine-month tax amnesty given to every Nigerian,
especially the high net worth individuals, to enable them to
declare their assets and incomes and get certain waivers, including
penalties and interest payments.

As the VAIDS expires on March 31 this year, banks are said to be
working on the technology that will enable them to submit the
required data to the tax authorities.

Findings showed that although the banks were making progress on
the technology, it would take some time to perfect and submit
taxpayers’ information to the government in line with the CRS
programme.

The information is expected to be shared with other countries,
which in turn will make available details of accounts and assets
held by Nigerians in them.

This is preparatory to the Federal Government’s plan to
prosecute defaulting taxpayers, especially the over 12,000 high net
worth individuals scattered across Lagos, Abuja, Port Harcourt and
other parts of the country, who have failed to take advantage of
the scheme.

A partner, Tax and Regulatory Services, PricewaterhouseCoopers
Nigeria, Esiri Agbeyi, said the government had discovered that many
Nigerians were not in the tax net.

According to Agbeyi, government’s findings have shown that many
of the high net worth individuals, including those who have
expensive assets within and outside the country, are either not
paying their taxes or paying far less than what they should be
paying.

As a result, the PwC partner stated that the Federal Government
was committed to implementing VAIDS to the letter.

She dropped the hint at a breakfast meeting organised by Ecobank
Nigeria in Lagos on Friday, adding, “Nigeria’s tax to Gross
Domestic Product ratio is currently at six per cent and the
government is committed to taking it to 15 per cent. Statistics
have shown that not so many people are in the tax base and many of
the HNIs are not paying taxes or are paying less.

“The Federal Government has therefore directed that every
taxpayer’s information must be collected by the banks and submitted
to the tax authority.”

Agbeyi said the information being obtained by the Federal
Government would be used to drive the VAIDS.

She stated that the Federal Government signed information
exchange agreements with the United Kingdom last August and many
other countries such as Ghana, to enable it to trace details of
Nigerians’ funds and assets in foreign countries.

“The government is getting all these in place to drive the
VAIDS. With all these in place, the government can then go after
those who fail to take advantage of the tax amnesty,” Agbeyi
added.

This is said to be similar to the US Foreign Account Tax
Compliance Act. The US FATCA, which was passed as part of the HIRE
Act, generally requires that foreign financial institutions and
other non-financial foreign entities report the foreign assets held
by their US accountholders or be subject to withholding tax.

According to reports, Nigeria has at least 12,000 high net worth
individuals, the second highest in Africa, coming after South
Africa, which has 40,000.

Of the over 12,000 high net worth individuals in Nigeria, over
6,800 are resident in Lagos, 4,000 in Abuja, while the remaining
can be found in Port Harcourt and other states of the
federation.

The Minister of Finance, Mrs. Kemi Adeosun, said the Federal
Government was targeting about $1bn from the VAIDS before the March
31 deadline.

A professor of law specialising in taxation, Abiola Sanni, said
tax amnesty had been used in several countries of the world to rake
in billions of dollars in revenue for governments.

According to him, findings have shown that the government can
get more in terms of tax revenue from the rich than from the
poor.

Sanni said, “The informal sector is important and the government
is already working on that. The truth is that the government can
get more from the rich through a tax amnesty programme like the
VAIDS.

“Tax amnesty has worked in many countries. Given our situation
in Nigeria, tax amnesty will help the government to improve tax
compliance and get more revenue to fund the budget.”

The Federal Government has confirmed that some foreign
countries, including the UK, have commenced the Automatic Exchange
of Tax Information, particularly on overseas assets held by
Nigerians.

Adeosun gave this indication during the presentation of the
Progress Report on Tax Laws Reform by the Vice Chairman of the
National Tax Policy Implementation Committee, Mr. Taiwo Oyedele, in
Abuja on Friday.

The minister expressed satisfaction with the data being supplied
to Nigeria by foreign countries under the AETI, to which the
country became a party in January this year.

She stated that Nigeria had written to a number of nations to
request specific information about offshore trust and bank accounts
held by its citizens.

The minister advised users of offshore structures to take
advantage of the VAIDS to regularise their taxes before the expiry
of the amnesty programme.

Adesoun said, “The offshore tax shelter system is basically
over. Those who have hidden money overseas are being exposed and
while Nigerians can legally keep their money anywhere in the world,
they must first pay taxes due to the Nigerian government so that we
can fund the needs of the masses and create jobs and wealth for our
people.

“The moral argument against illicit financial flows and tax
evasion and the strong international cooperation are such that
every Nigerian taxpayer should do the right thing. The needs of our
people for development override any other argument against payment
of tax.”