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The Federal Inland Revenue Service (FIRS) recently revealed that it will generate N750billion from about 55,000 millionaire tax debtors in the country. The move may not be unconnected with the government’s new revenue streams, especially the identification of new taxes, which the Ministry of Finance is working on with the Inland Revenue Agency to fund the 2019 budget and broaden the tax base.
The move was disclosed by the FIRS Executive Chairman, Mr. Babatunde Fowler, while addressing the House of Representatives joint committees on Finance, Appropriation, Aids, Loans and Debt Management, Legislative Budget and Research and National Planning and Economic Development on the 2019/2021 Medium Term Expenditure Framework and Fiscal Strategic Paper, in Abuja. According to the FIRS boss, the recent bank account substitution exercise carried out by the agency resulted in the recovery of N23.35billion. The exercise has also been extended to cover those with a turnover of N100 million and above. Currently, about 500 of the millionaire debtors have come forward to pay their taxes in the region of about N24billion. The N750billion target from millionaire tax debtors is coming against the backdrop of government’s unveiling of plans to woo owners of undeclared foreign assets with amnesty and permanent waiver of criminal prosecution through the Voluntary Offshore Assets Regularisation Scheme (VOARS).
According to the Attorney General of the Federation and Minister of Justice, Abubakar Malami, the immunity would shield owners of offshore assets who are willing to voluntarily declare them. The Executive Order 8 already signed by President Muhammadu Buhari acts as a legal basis for the Swiss Consortium, whose services government has engaged, to approach third party holders of the fund with a view of assessing information of the owners of undeclared foreign assets.
We believe that this is part of government’s efforts to increase Nigeria’s tax revenue and rein in tax defaulters, especially the super rich or millionaire class that evade tax. We support this drive. It is, indeed, sad that many millionaires in the country pay little or no tax at all. Therefore, bringing them into the nation’s tax net will boost the nation’s tax revenue.
In the same vein, the VOARS will complement the Voluntary Asset Income Declaration Scheme (VAIDS). Findings by the Ministry of Finance a few years ago, revealed that there were about “65 million economically active people” in Nigeria who are not tax compliant yet. It is for this reason that the International Monetary Fund (IMF) advised the Federal Government to broaden its revenue base in order to finance growth-enhancing infrastructure and social programmes.
In other climes, governments realise more revenues from wealthy individuals and money-spinning corporations, and tax evasion is a criminal offence. Therefore, the current drive by the FIRS to track millionaire tax debtors through the internationally recognised Common Reporting Standards (CRS) should be encouraged. The system is used to track the ‘super rich’ tax evaders and bring them to the tax net. Currently, Nigeria’s six per cent tax ratio to Gross Domestic Product (GDP) is one of the lowest in the world. Also, Nigeria is ranked 124 out of 138 countries on Global Competitiveness index. This gap can be closed if economically active people, including the very rich and companies pay their taxes.
While we support the government’s effort to bring the millionaire tax defaulters into the nation’s tax net for increased revenue generation, there is need to improve the Ease of Doing Business in the country. Unfortunately, Nigeria is still at the bottom rung of Ease of Doing business in the world. Power supply is a perennial problem. There is also insecurity. These are disincentives to business operations and profitability.
Apart from increasing the nation’s tax revenue, the citizens want to see what government is doing with tax payers’ money. While we agree that paying tax is a necessity, Nigerians are yet to see its impact. Therefore, if the government can use tax revenue to provide infrastructure, tax evasion will be minimised. We commend the plan to widen the nation’s tax net but caution that the exercise should not be done in such a way that will lead to increase in the price of goods and services.
