Interview : Babatunde Fowler
On what metrics can the FIRS assess the performance of the Voluntary Assets and Income Declaration Scheme (VAIDS)?
BABATUNDE FOWLER: We had a federal tax amnesty in 2016, during which quite a number of organisations came forwards. VAIDS marks the first time that a tax amnesty has been opened up to both corporations and individuals. At the federal level, we received a significant number of intakes in terms of total collections, as we received declarations of about N96bn ($310m). At the level of the states, which have a responsibility to tax individuals, the programme was quite successful, as we were able to grow the tax base from 14m to 19.5m, as well as gather information that we can use to further broaden the tax base. There is still room for improvement, and we believe that there remain 20m individuals who are not paying state taxes.
Why has the FIRS used substitution to go after taxpayers who default on their liabilities?
FOWLER: After giving taxpayers three opportunities – first at a meeting with stakeholders in 2015, then with the 2016 amnesty, and thereafter with VAIDS in 2017 – we found that there are still quite a few corporate clients that have not come forward to honestly declare their tax obligations. Under the law, we have the right to appoint banks as collection agents to work on behalf of the FIRS. We appointed the banks and looked at the net worth of those individuals and businesses that have generated a minimum of N1bn ($3.2m) in annual turnover for three years and have no tax ID or remittances. We identified close to 6000 such entities and individuals. We met with stakeholders to brief them on why we are using substitution, which is an option that has been on our books for quite a while. While it is a last resort, we will expand this programme by including businesses, partnerships, enterprises and individuals with more than N100m ($323,000) in yearly turnover.
What impact has the property valuation assessment programme had to date?
FOWLER: Of the assessments that we carried out, 99% were cases where property owners held their assets under company names, had not filed any returns and had not paid any taxes. We used the value of the property to estimate its owner’s turnover. The law allows us to use our best judgement to determine turnover and estimate profits at 20% of the rate of turnover, and that profit can then be taxed at the rate of 30%. We have just launched this programme in the Federal Capital Territory (FCT), Lagos State, Oyo, Osun and Kaduna. In the FCT, where we have already concluded this exercise, we have issued assessments for over 2000 such properties, and in Lagos, we are up to 5000 assessments. We will eventually roll out this programme across all 36 states, although there will be challenges in those states where there is no land registry or a formal record of companies owned under corporate names. As we gather this information, we believe that within the next 24 months, we will have covered the whole country.
How can internal revenue-generating capacity be improved at the state level?
FOWLER: The FIRS and all the state tax agencies are members of the Joint Tax Board. The members of the board have a common vision and mandate to fund our respective governments and ensure that we can meet a large degree of our budget obligations. We have signed a memorandum of understanding with the state governments that enables joint audits and information sharing, which has led to an increase of taxpayers, both at the state and federal levels. We have also recently concluded the consolidation of all taxpayers on a single platform, which will be made available to all tax administrators. When it comes to capacity building, we also have a free, temporary exchange of staff between the states and the FIRS.
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