Kemi Adeosun, Minister of Finance on Tuesday advised Nigerians to review any existing tax planning schemes, including those in offshore tax havens, in order to take advantage of the Voluntary Assets and Income Declaration Scheme (VAIDS) to regularise their tax status where necessary.
The Minister gave this advice during an interactive session with the media and was asked a question about the legality of the use of offshore tax shelters.
She stated that whilst the use of tax avoidance schemes was legal, tax evasion was not.
She said, “The critical question to be asked of all Nigerian tax payers using offshore tax shelters will be whether all applicable taxes have been paid prior to the transfer of funds or assets to a tax shelter.
“If all taxes had been paid, then there will be no additional liability except tax payable on further income earned on those funds. However, if taxes had not been paid, then the use of such schemes is illegal.”
Adeosun counselled users of such structures to seek professional advice, explaining further that the Federal Ministry of Finance was offering free training to professional advisers on the VAIDS to enable them support their clients.
She urged users of offshore tax shelters to promptly embrace the VAIDS scheme to regularize their tax status, adding that Nigeria’s low tax revenues were at variance with the lifestyles of a large number of its people and with the value of assets known to be owned by Nigerians resident around the world.
“VAIDS ushers in an opportunity to increase the nation’s general tax awareness and compliance. It is a time-limited opportunity for taxpayers to regularise their tax status relating to previous tax periods.
“In exchange for fully and honestly declaring previously undisclosed assets and income, taxpayers will benefit from forgiveness of overdue interest and penalties, and with further assurance that they will not face criminal prosecution for tax offences or be subject to tax investigations,” stated Nigeria’s Finance Minister.
Adeosun, who also responded to further questions from the media practitioners, explained that with the increasing global focus on illicit financial flows and tax evasion, offshore tax shelters no longer offer robust protection against tax authorities.
She, therefore, added that the continued use of such schemes poses enormous risks for the users.
On questions relating to the recent leaks by Panana Papers and Paradise Papers, the Minister remarked that the leaks were just the beginning of what is likely to be a systematic unravelling of the offshore tax haven system.
According to her, the Federal Ministry of Finance’s data mining project would use data provided on Nigerians from such leaks to crosscheck tax declarations.
She urged Nigerians to cooperate with the Government by paying the right taxes to both the Federal and State Governments in order to provide the much needed funds that will improve the lives of Nigerians.
The Minister maintained that sanctions await defaulters who refuse the Federal Government’s offer of tax amnesty, including the full payment of outstanding tax liability and criminal prosecution.
She said further that businesses, which untruthfully comply, would be liable as whatever was paid on the declared liabilities may be considered as part-payment of the outstanding sum later discovered by the authorities.
On impetuous defaulters who fail to utilise the VAIDS window, Adeosun said such offenders would face criminal prosecution by the Federal Government.
VAIDS was established on 29th June, 2017 via an Executive Order signed by Vice President Yemi Osinbajo (the then Acting President) as a broad-spectrum solution to virtually all the defects in the country’s tax system, including negativity towards taxation.
The first phase of VAIDS runs from 1st July, 2017 while the second phase ends on 31st March, 2018.
Job creation is one of the spin-offs of the VAIDS initiative, with the scheme expected to create a total of 7,500 opportunities for Nigerians as Community Tax Liaison Officers (CTLOs) through the N-Power scheme of the Federal Government.