With the introduction of the Voluntary Assets and Income Declaration Scheme (“VAIDS”), taxpayers in Nigeria have until March 31, 2018 to declare their assets and income in a move by the Nigerian government to combat tax evasion. To ensure the success of VAIDS, the government must be alive to its responsibility to sustain public trust in its implementation.

On June 29, 2017, the then acting President of Nigeria, Prof. Yemisi Osinbajo, SAN, GCON, signed Executive Order No. 004 on the Voluntary Assets and Income Declaration Scheme (“VAIDS” or “scheme”) to launch a tax amnesty in Nigeria. Pursuant to the Order, the Federal Ministry of Finance is required to set up the scheme for all categories of taxpayers who have defaulted in their tax obligations and are willing to comply with the terms and conditions prescribed in the Order, and any subsequent regulations that may be issued in that regard.

The scheme provides a nine-month window effective from July 1, 2017 to March 31, 2018 within which delinquent taxpayers are required to step forward and declare their assets and income from all sources within and outside Nigeria relating to the preceding six years of assessment (2011 to 2016). In return for truthful and voluntary disclosure, and compliance with the regulations and guidelines, and payment of their outstanding tax liabilities, the affected taxpayers shall enjoy the following benefits:

  1. immunity from prosecution for tax offences
  2. immunity from tax audits
  3. waiver of interest
  4. waiver of penalties
  5. option of spreading the payment over a three-year period as may be agreed with the relevant tax authority

Issues when implementing the order

Before highlighting the expectations created by the Order for both the government and taxpayers, and how to bridge the gap to ensure the success of VAIDS, it is important to review some issues bordering on the implementation of the Order for necessary action by the Federal and the State governments.

First, in an article on pg 44 of The Guardian newspaper of October 3, 2017, the government, as part of its public education on VAIDS, stated that waiver of interest will lapse on December 31, 2017, after which any unpaid tax will attract interest. While the government might have introduced this new rule, presumably, to motivate early action by taxpayers who wish to enjoy the full benefits of VAIDS, it is not supported by the Order.

Second, the Order is not explicit on the purpose of asset disclosure by taxpayers as there is no obligation in the tax laws, or any law for that matter, for a taxable person who is not a public officer holder to declare his assets, not least for the purpose of personal income taxation.

Third, is the question of fiscal federalism by which that State governments have to do more than rely on the Order to enforce compliance with it against taxable persons resident in their respective States.

Expectations of Government

Paragraph 3 of the Order provides that:

“The Scheme shall encourage and provide an opportunity for eligible taxpayers to:

  1. regularize their tax status for all the relevant years
  2. pay all outstanding taxes
  3. prevent and stop tax evasion
  4. ensure full tax compliance”

It can be deduced from this that the government expects the following outcomes from its offer of amnesty to taxable persons in Nigeria who have been derelict in performing their civic obligations:

  1. its offer will be heartily welcomed and accepted by taxpayers who would respond by fully disclosing their income and the related liabilities, and paying the resulting overdue taxes;
  2. payment of the overdue taxes will enhance its revenues and provide additional cashflow to finance its budget, and reduce its dependence on borrowing to plug the deficits and the attendant costs;
  3. VAIDS will be a watershed for improved tax compliance culture in the post-VAIDS era in Nigeria; and
  4. the anticipated success of VAIDS in ramping up its revenues will henceforth increase its tax to GDP ratio which is currently 6 percent. Indeed, the government estimates that its projected 1 billion dollars revenue from VAIDS and continuing tax compliance will raise its tax to GDP ratio to 20 percent by 2020.

Taxpayers' Expectations

From the consequences of non-compliance in paragraph 8 of the Order (which include criminal prosecution, liability to pay the tax due, and penalties and interest thereon), and the assurances to keep taxpayer’s information disclosed under the scheme confidential, the government has raised the expectations of taxpayers in many respects. Below are what can be considered to be the minimum expectations of taxpayers in this regard:

  1. that the government will respect the basis of taxation of individuals under the Personal Income Tax Act, which is residence, and will not go overboard to tax them on the basis of their assets.
  2. compliant taxpayers expect that persons or businesses operating in the amorphous informal sector will be mainstreamed by the government to become taxpayers like themselves. Consequently, with the informal sector in the tax net, there will be a level playing field between both sides of the divide hereafter.
  3. that the government and its officials will, indeed, respect the privacy of taxpayers taking advantage of the scheme to remediate their default, and keep their information disclosed confidential. Equally, they can legitimately expect that where their confidential information is leaked, that the erring discloser will be duly prosecuted as provided in the Order.
  4. that there will be transparency and accountability by the government for the revenue realized from the scheme and future taxes to be paid by taxpayers.
  5. that there will be better social and economic infrastructure, such as security, health, education, energy and transportation, to improve quality of life of taxpayers.

Bridging the Expectation Gap

The expectations of the government and the citizenry, though apart, are not irreconcilable, provided each side accepts responsibility for performance of their respective obligations. However, without mutual trust, the outcome will be hopelessly disappointing to both parties. There is enough trust deficit in the system which the government and all its agencies, directly or indirectly involved in VAIDS implementation, must not aggravate.

The following are some of the measures that the government must undertake to bridge the expectation gap.

##The Government must keep Taxpayer’s Information Confidential Government must be faithful to its promise to keep taxpayers’ personal information confidential. Therefore, the tax authorities must not share the information provided voluntarily by taxpayers with any law enforcement agency, as this would breach its self-imposed duty of confidentiality to taxpayers.

The Scheme must not be used to Achieve any Extralegal Objective

There is nothing on the face of the Order to suggest that it is a mechanism for enforcing the anti-corruption and anti-money laundering laws, and any other law for that matter. Therefore, the boundaries must be respected to avoid shaking public trust. However, as complying with VAIDS does not foreclose enforcement of the anti-corruption and anti-money laundering laws, it is up to the agencies administering such laws to do their work independently and let justice take its course. But under no circumstances must the tax authorities share information with them, however virtuous this might be, as anything to the contrary will be a breach by the government of its self-imposed duty of confidentiality.

The Benefits Promised must not be Undermined

The government must use VAIDS to win the trust of taxpayers. One way to do this is to stick to its promises, by not saying or doing anything to contradict itself, or abridge the benefits of voluntary disclosure that taxpayers deserve. For instance, per paragraph 4(e) and (f) of the Order, amongst taxpayers eligible to participate in VAIDS are those:

“under a process of tax audit or investigation with any relevant Tax Authority; and/or are engaged in a tax dispute with the relevant Tax Authority but are prepared to settle the tax dispute out of court”

The Federal Inland Revenue Service (“FIRS”) had evinced the intention to respect the rights of taxpayers undergoing tax audit to participate in the scheme. However, this is provided they comply with VAIDS requirements to make a full declaration of their assets and income to the FIRS for consideration and exclusion from tax audit. The FIRS must keep faith with this and not be driven by the potential loss of interest and penalties to be waived under VAIDS to deny eligible taxpayers the benefits of VAIDS, on no other ground than that they are under an audit. The same rule should also apply to taxpayers under investigation, even though this has not been referenced by the FIRS in its communications.

It is questionable if any tax authority can rightly deny a taxpayer the benefit of interest waiver for failing to make voluntary disclosure before December 31, 2017. The restriction introduced by the above referenced newspaper publication is overboard and inconsistent with the Order, which clearly grants waiver of interest and penalties without limiting the eligibility for these benefits to disclosures made within a particular time during the nine-month period. Admittedly, paragraph 1 of the Order provides that the scheme was set up for the benefit of eligible taxpayers who fulfil “the terms and conditions as may be stipulated in this Order and other subsequent complementary regulations.” To date, no complementary regulation has been issued, and none of the press publications aimed at public education either singly or collectively equate to a regulation. In any case, any regulation issued pursuant to the Order must complement and not contradict the Order, otherwise it will become invalid to the extent of its inconsistency. The government, therefore, needs a rethink and should reverse itself.

Government must be Fiscally Responsible

While paying tax is a civic obligation, it behoves the government to make tax payment a joy for taxpayers through voluntary tax compliance. This will only happen when the government becomes fiscally responsible through judicious spending of its revenues, full transparency and accountability, by preventing leakages through corruption, and making corruption unattractive through appropriate sanctions.

Tax Compliance Must be Enforced

It is of no use having laws that are not enforced, not least against tax evaders. Whether VAIDS would achieve the anticipated outcomes will, ultimately, be determined by how far the government is willing to go in invoking the tax laws to sanction those who are cheating the system.

While the FIRS and the Lagos State Internal Revenue Service have consistently applied civil measures to enforce tax payment, criminal prosecution is rare and, perhaps, non-existent. But until tax enforcement gets to this point, we are unlikely to see a change in tax compliance culture in Nigeria. The question is whether we have reached the tipping point when the government will muster the political will to prosecute tax offenders. Or will it be business as usual? If this is the case, VAIDS will not be the catalyst that we hoped for, and we can as well forget it.

The Judiciary must be on Board

What follows after March 31, 2018 when VAIDS expires will determine how serious the government is about entrenching tax compliance culture in Nigeria. It is not uncommon to see laws breached with perfect impunity in Nigeria. Hence, if there is no enforcement of tax compliance arising from non-disclosures or incomplete disclosures under VAIDS from April 1, 2018, then nothing would have changed, and we would continue with business as usual. But assuming the government will muster the political will to prosecute tax offenders, the question is whether the Federal and State justice departments and the judiciary are ready for the challenge. Without necessary investment in capacity building by both institutions, diligent prosecution of offenders by the executive and timely disposal of cases by the judiciary, without fear or favor, justice administration, generally, and tax compliance enforcement, in particular, will remain a myth.

Respect for the Right of Taxpayers to Resolve their Tax Disputes at the Tax Appeal Tribunal

There is no doubt that tax disputes will arise from VAIDS implementation. As in most jurisdictions, the Tax Appeal Tribunal (“TAT”) as a mechanism for the first round of tax dispute resolution before recourse to the regular courts, is provided for under the Federal Inland Revenue Service (Establishment) Act, 2007. Amongst other things, it has the advantage of being faster, cheaper and less legalistic than the regular courts. The tenure of the last TAT lapsed in May 2016. Since then, taxpayers have been waiting on the government to reconstitute and inaugurate the TAT for expeditious resolution of their tax disputes. While it is acknowledged that they could file their tax appeals pending when TAT is reconstituted, or otherwise file their case at the Federal High Court (“FHC”), the cost of waiting until the TAT is reconstituted, and the higher cost of litigating their disputes at the FHC, can better be imagined than experienced. It is expected that the government will appreciate that time is of the essence and will, therefore, take necessary steps to ensure that the expectation of taxpayers in this regard is not further eroded.


While VAIDS may be good for Nigeria, it will only deliver the expected goods if the government is able to do all it can to engender and sustain public trust in implementing the program. At the same time, the citizenry cannot afford to wait until the government becomes fully responsible in the performance of its socio-economic obligations before they begin to pay taxes as and when they should.

The glaring truth is that the government cannot perform those obligations unless there is money in the treasury. Particularly as the current practice of borrowing at high interest rates (which peaked at 22 percent on Treasury Bills and 14 percent on savings bond) to finance budget deficits is not sustainable in the long-term. We have thus reached the stage where without tax, the government cannot function the way it should. At the same time, the government must not take taxpayers for a ride. It must be alive to its fiscal responsibility.

And just as the government can exercise its coercive powers to enforce tax, so must the citizenry exercise their civil right to demand transparency and accountability from the government. This is where the civil society is relevant as a powerful force to make the government responsible in the use of public funds. The Open Government Partnership (“OGP”) is in its infancy but expected to be strengthened to become a force to reckon with on advocacy for responsible taxation in Nigeria. Some lessons can be learned from the crowd-funded Organization Undoing Tax Abuse (“OUTA”) in South Africa in this regard.

Furthermore, just as the various human rights groups were instrumental to the rebirth of democracy in 1999, so also can the various pressure groups work together to enforce fiscal probity and responsibility on the part of the government in Nigeria. Thankfully, the Fiscal Responsibility Act, 2007 has provided the legal and regulatory framework by which the government can be made responsible, and held accountable for its statutory fiscal obligations. Indeed, section 51 of the Act provides that “A person shall have legal capacity to enforce the provision of this Act by obtaining prerogative orders or other remedies at the Federal High Court, without having to show any special particular interest.” Hopefully, this will engender public interest litigation by concerned citizens in this era.

Last, but by no means the least, the press also have a role to play as the fourth estate of the realm. Indeed, the social media with its beauty of open and unrestrained access to its users provides a veritable platform for the citizenry to make their voices heard. This is an irrepressible weapon in hands of the citizens that is, perhaps, more powerful than the judiciary to judge the government whose survival, ultimately, depends on the popular support of its citizenry.

Reproduced with permission from BNAI European Tax Service Monthly Digest, Bloomberg BNA, 11/30/2017. Copyright © 2017 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com