Tax: Assessing merits of offshore assets returns

As part of measures to combat tax evasion perpetrated through
foreign investment by Nigerians, the Federal Government recently
signed a legislation on offshore assets -Voluntary Offshore Assets
Regularisation Scheme (VORS 008),–which is seen as another source
of revenue Abdulwahab Isa reports

There isn’t a comprehensive list on hidden offshore assets of
Nigerians. Any list in circulation revealing assets of certain
individuals is neither here nor there.

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.

Combat illicit financial flow

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 Flow (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 Flow (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 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 fulfillment 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.

Last line

Detailed information on 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.