SPEECH DELIVERED BY HIS EXCELLENCY, PROF. YEMI OSINBAJO, SAN, GCON, THE
ACTING PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA AT OPENING OF THE VOLUNTARY
ASSETS AND INCOME DECLARATION SCHEME AT THE BANQUET HALL, STATE HOUSE ON
THURSDAY JUNE 29, 2017
“When people pay taxes, they pay attention to what government is doing.
There's a level of social and political consciousness which people have when
they pay taxes. So when people say that this is tax payers' money that you are
spending in that way, it is evident that it's because this money is coming from
their pockets that they are able to question political authority, question
people who say there're representing them and question government programmes as
well”.
“According to the Federal Inland Revenue Service, the total number
of tax payers in Nigeria is just 14 million. Of this number, 96% have their
taxes deducted at source from their salaries under the P.A.Y.E system while
just 4% comply under Direct Assessment. So the vast majority of Nigerians do
not pay taxes.”
“Tax is not a tip given to government according to how we feel. It’s an
obligation and a civic duty”
PROTOCOL
Let me welcome you to a very happy and exciting morning. I looked all
over the room and I see that there are several people here who have promised to
pay more taxes and I was making my notes diligently because when we leave here,
we'll be asking a few questions about how much tax people have being paying.
Taxation has always been the basis of raising public revenue in
practically every society. It was so normal that one American thinker said that
two things are certain; death and taxation. Without a doubt, in many parts of
the world, two things are considered certain; death of course is certain, and
then taxation.
But one other fellow who I suspect is a Nigerian added to those words of
wisdom; he said tax and death are certain but at least death is only once but tax
is every year.
In Nigeria, historically, every one of the old regions recognised
taxation and it's interesting that practically every region sponsored all its
programmes with tax money. The first region to recognise formal tax was the
Northern region and thereafter, the South and last being Southeast. When I
mentioned this to a very good Governor friend of mine who is from the Southeast
that how come the Southeast came last in taxes, he said that "we were the
smartest of all. (General laughter)
But because people paid taxes, the level of political and social
consciousness was high. I was reading some notes on free education in the West
and it's so interesting that free education in the West was paid for mainly
from taxes of the people. The people were mainly farmers but they paid taxes in
order to be able to pay for a programme such as free education. Many resisted
the payment of taxes for free education. But when you look at the history of
it, it was a very painful exercise, it was widely resisted even in the West.
People didn't want to pay taxes but the result of the payment of taxes was one
of the most successful free education programmes in the world. It is still
cited as one of the most successful.
One thing that it showed was that when people pay taxes, they pay
attention to what government is doing. There's a level of social and political
consciousness which people have when they pay taxes. So when people say that
this is tax payers money that you are spending in that way, it is evident that
it's because this money is coming from their pockets that they are able to
question political authority, question people who say there're representing
them and question government programmes as well. Taxation leads to a situation
where the people hold the government to account.
A few years ago as Attorney General in Lagos State, I had a very
interesting experience. There was a man who worked with me and was in the
administrative cadre. He was the secretary of the Thrift Society; this is a
society where people pay a certain amount of their salary every month into a
pool and they take it in turns to draw from that pool. It's called 'ajo' in
some places but it's a thrift type of society.
One day, I heard that the man had disappeared but his wife and children
had been arrested and I was quite surprised. As it turns out, the man who was
supposed to collect his own portion of the money came to collect it and
discovered that this fellow had run away. Why? Because the fellow couldn't
account for the money. So the man told other members of the thrift society and
they apprehended his wife and children and took them to the police station.
It was while they were there that the report was made to me. It struck
me that here was a situation where people decided that they had to go against
this person by law because the man had made way with resources and they didn't
even wait for the man to come back because they went to arrest his wife and
children.
When you compare that for instance with a man who becomes a local
government chairman and didn't even have an okada when he was campaigning, and
becomes local government chairman today and the next day he's riding around in
a jeep which he says he bought by the blessings of the almighty God. When that
happens, you hardly find people going to arrest or tackle him. Why? Because
people don't feel it's their money. It is not tax payers' money. They just say
it is money, government money.
But when people pay taxes, there is no way they will allow the kind of
corruption we find in the public space today because people will say it's their
money and will hold public officers to account. I think it's very important
from the point of view of accountability and from the point of view of holding
those of us in government to account.
This is part of the reason we are trying to reset our whole attitude to
tax and the Nigerian economy. Because when you look at what has happened with
oil, obviously nobody paid any more attention to taxation and of course with
the coming of the Military, there seemed to be enough money, so taxation was
almost completely ignored.
So what we found, by and large with oil money diminishing, was tax
wasn't coming to speed at all. We are just not making as much money from
non-oil revenues and today we are faced with a situation where if we don't
ensure that people pay taxes, we will certainly not be able to sustain social
services or any kind of services for the growing population of our
people.
The Nigerian tax system is based on global best practice, so it's a
progressive tax system ensuring that those who have high incomes contribute
more while those with lower incomes contribute less.
Considerable progress has been made with taxing those in salaried
employment; generally speaking, those who earn salaries that are known in the
formal setting pay taxes. Those are the people we know who pay taxes. Outside
of that group of people, there are many high net worth individuals,
self-employed professionals and companies that are able to evade full tax
payment due to the historical inability of tax authorities to assess their true
income.
According to the Federal Inland Revenue Service, the total number of tax
payers in Nigeria is just 14 million. Of this number, 96% have their taxes
deducted at source from their salaries under the P.A.Y.E system while just 4%
comply under Direct Assessment. So the vast majority of Nigerians do not pay
taxes. That's just the sum and substance of this. This is at variance with the
structure of our economy where we are estimating that almost 70 million
Nigerians are economically active. This means that just 20% of people engaged
in one form of business or the other are registered and paying taxes.
There is a detailed analysis of those paying taxes and the statistics
really are quite alarming. Despite having some of Africa's wealthiest people
whose lifestyles are the subject of global admiration, only 214 Nigerians pay
taxes of N20 million or more each year. For the non-mathematicians amongst us,
a personal tax bill of N20 million implies a personal income of 80 million.
Even in this room and I'm not looking anywhere in particular, I'm sure I can
count at least another 214 people that earn more than 80 million a year. That group
of 214 excludes many names and of course there are so many people who can pay
well over 20 million.
Another worrying observation is that the 214 who shall remain nameless
are all based in Lagos State. There's another figure that talks about those who
pay over N10 million and that comes to 914 or so, but that number, all except 2
are from Lagos State, the other two are from Ogun State, which by the way is my
State. To be honest about this, what we are to believe is that nobody is
earning over 80 million in a year or even less than that in other States. Don’t
forget that these are people who are directly assessed.
I was privileged alongside our President, President Muhammadu Buhari to
travel the length and breadth of this nation and can assure you that there is a
fairly equal spread of high net worth people in this country. Before any one
attempts to cover their embarrassment with an indication of how much taxes are
paid through their companies, as a lawyer I’m well positioned to inform you
that such explanations are not tenable.
There must always be a correlation between personal income taxes and
personal lifestyle. Personal assets can only be financed by income that has
been subjected to tax. No company’s expenses should account for the cost of a
jetset lifestyle or luxury personal apartments. Neither can any company account
for the estimated 320 million pounds that Nigerians pay in oversees school fees
in the United Kingdom alone annually. Such expenses are “non-allowable
deductions for company income tax purposes”.
Let me explain this complicated thing I have just said: if you have
children abroad and you’re paying good money or if you have a very nice
apartment where you live, a lot of those personal lifestyle things cannot be
covered up under company’s expenses because they are your personal lifestyle
issues. Those are not allowable, you can’t deduct them from your company
expenses. As a lawyer I know you really can’t dodge taxes in that way.
So those who have been doing so, some of who are here, at least be
assured that it is not permissible and you can’t hide those kinds of expenses
under your allowable expenses in your company.
Now let me make it clear that this problem is not exclusively confined
to the rich. At all levels of income, there is evasion of taxes. Many people
have multiple income sources but declare just one. Tax is not a tip given to
government according to how we feel. It’s an obligation and a civic duty. It is
very clear that in the past, Nigerians have used tax evasion techniques to
minimise personal tax burden but the problem is not limited to individuals.
Data that is available at our disposal suggests that tax evasion is equally
prevalent at the corporate level, indeed more so. Many companies have distorted
the ancient accounting concept of double entry and now maintain two or three
sets of books; one for the tax man showing low revenues and high expenses,
another set showing the reverse for internal views. Others collude with corrupt
tax officials over the years to fraudulently understate their obligations to
government. Some have charged VAT and not remitted it to the FIRS. Others have
deducted taxes from employees’ salaries and have pocketed the funds.
Tax evasion is not a uniquely Nigerian practice, some multinationals
have used profit shifting to rob Nigeria of its share of the revenues generated
from within this nation. You’ve heard that Nigeria’s tax to GDP ratio is just
6% and this is one of the lowest in the world. We must change this.
For the last 15 months, a high level team has been working with the
Ministry of Finance, undertaking a major data mining exercise. The project was
called project Light House and has been able to search various databases
including but not limited to Bank Verification Numbers, Corporate Affairs
Commission, Nigerian Financial Intelligence Unit, Land Registry Records,
Vehicle Registration Records, Immigration and Travel Records and of course
mainly Whistle Blower tips to track financial outflows. The project has also
engaged, on retainership, one of the world’s leading asset tracing firms.
Nigeria has also solicited and obtained input from various nations who have
availed us with data under the many conventions and treaties that they’ve
signed. The project has been able to create accurate financial profiles of many
thousands of Nigerian companies and individuals which shows levels of
non-compliance.
Tax evasion is not just a civil matter, it is also is a crime. I think
that we all must be familiar with the fact that in many countries of the world
where tax revenues are used, it is because of the level of tax compliance which
is enforced by law.
There is a global movement to tackle the problem of illicit financial
flows which includes tax evasion. Nigeria is now party to the automatic
inclusion of information which comes into effect in 2018. This means that
Nigeria will automatically have information required to successfully pursue tax
evaders across the world. Specifically, we will have access to details of the
beneficial owners of assets held abroad including those in tax havens.
The level of non-compliance suggests a fundamental problem across the
nation and at all income levels. This has influenced our decision to recruit
and train the 7500 Community Tax Liaison Officers who we saw a few minutes ago
and some of whom we’ve heard from today. These young graduates will go back
into every community and educate us all on the tax system and the duty it
imposes on every economically active citizen.
We must recreate our original society structure where every citizen pays
their fair share of tax from their produce even long before the creation of
money. To this end, we have agreed that every Thursday starting from today and
for the next one year will be declared “Tax Thursday”.
We expect the FIRS and every State Government, of which we will be
asking for the collaboration of Governors of the States, to organise
sensitization events to raise awareness of the tax system which will result in
massive enrolment of new tax payers. We must enrol at least 4 million new tax
payers and increase the level of payment amongst the 14 million already
registered.
We expect that all State Governors will personally meet this initiative
and support the work of the Community Tax Liaison Officers, CTLOs, by
personally participating in programmes every Thursday. I also request that the
CTLOs are supported by other state officials to ensure that they are accepted
and welcomed in our shopping malls, markets, airports, schools, places of
worship and community gatherings.
It is our collective duty to ensure that every adult citizen knows his
or her duty to this nation. It’s interesting that despite differences in
language and culture and even political persuasion, the subject of payment of
taxes unites all Nigerians. Nigerians of all languages and tribes will
demonstrate a remarkable degree of national unity when asked why they fail to
pay taxes. In chorus they will declare in various tongues and dialect – we
don’t pay because Government is not providing the services or ask, what are
they doing with the taxes anyway? How do we know that the taxes will not be
diverted?
Some people say that we are already pseudo Local Governments anyway and
provide all these services ourselves and still pay some levies. However, this
is a false economy because collectively through the tax system, we can achieve
more with greater cost efficiency rather than a selfish
everyman-for-himself-and-God-
A million generators instead of a single power plant is inefficient. A
thousand jeeps instead of a road repair programme is erodible as our plethora
of bore holes instead of pipe borne water. I could list more examples. However,
I fully understand that the call for improved tax compliance must be
accompanied by accountability and service delivery. The issue of accountability
for tax revenue is one that this government led by President Muhammadu Buhari
is fully ready and able to address.
This government has demonstrated that it has the will and the capacity
to deliver services to Nigerians. During the worst economic recession in
memory, we have delivered some critical projects with less money, we have
demonstrated the unrelenting fight against corruption that funds paid to
government must and will be used for projects that will directly improve the
lives of Nigerians.
In our war on waste and inefficiency at all levels, we have positioned
ourselves to ensure that tax revenues will be a driver of real lasting and
wealth creating progress. Through our physical sustainability drive, we are
systematically replicating those reforms at State government levels.
Based on information on tax evasion that is now available, our personal preference
is that those who have diverted Nigeria’s legitimate tax revenues abroad or
concealed them within Nigeria should face the full force of the law. However,
the extent of non–compliance coupled with the urgent need to revive the economy
has persuaded all of our policy makers that we adopt a pragmatic approach of
declaring a time limited programme to be known as Voluntary Assets and Income
Declaration Scheme, VAIDS. This is being operated by the Federal Income Revenue
Service and all the States' Boards of Inland Revenue and applies to all
taxes.
The Voluntary Assets and Income Declaration Scheme, VAIDS will be
operated from July the 1st, 2017 until the 31st of March, 2018. It will
be supported by an Executive Order that I will sign into law today. VAIDS will
offer a once in a lifetime opportunity to those in default to regularise their
tax affairs.
In exchange for full and honest declaration, tax payers will receive
immunity from prosecution, forgiveness of penalty and interest that is due on
unpaid taxes and the full assurance of all information provided will remain
confidential. In addition, participants in the scheme will not be selected for
audit investigation for the period covered. This is an offer in the spirit of
national reconciliation and rebuilding and must be taken as such.
In addition because we understand that some tax payers will have
challenges in raising cash, we have built in a system that will allow those
owning to pay over a period of time subject to conditions. Upon expiry of the
scheme, we will consider those who have failed to take advantage of this offer
or who have declared falsely to be wilful tax defaulters and economic
saboteurs. We will then proceed with aggressive investigation with a view to
criminal prosecution.
We will also publish a tax defaulters list, to name and shame those
refusing to do the right thing. To support the VAIDS programme, we will create
mass awareness, we will be conducting extensive sensitization workshops for
professionals in Law, Accounting and Taxation, to enable them provide advice to
the truly patriotic Nigerians who want to take advantage of this olive branch
which is an offer of amnesty. I urge those who believe that they may be in
default to consult with their professional advisers. I also urge you to consult
with your spiritual advisers and you clearly understand that payment of taxes
is an obligation in all the major religions.
I am certain that there will be more consultations concerning this
programme but the most important consultation must take place in our quiet
moments of self-reflection when we consult with our conscience. We must ask
ourselves candidly whether we have been fair to our country; whether the nation
on which we have generated our wealth has received its fair share, whether we
have contributed to the welfare of our fellow Nigerians by paying our fair
share of the funds needed to develop this country.
We need to do our civic duty with pride by paying the right taxes. Let
us join together and defy the sceptics who are convinced that Nigerians will
never pay taxes. These same sceptics are equally convinced that Nigeria will
not progress. But together we can build this great Nation and finally attain
the progress that we so earnestly desire and so richly deserve.
Today I declare payment of tax is our duty to our nation and I declare
the Voluntary Assets and Income Declaration Scheme open.
I thank you very much for listening, God bless you.
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