In a bid to tackle tax evasion among wealthy citizens, Nigeria is gearing up for a fresh approach with a new tax amnesty scheme set to rectify the shortcomings of its predecessor, the Voluntary Assets and Income Declaration Scheme (VAIDS).
Announcing the initiative, Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, revealed plans for a national tax amnesty in 2024. This move comes amidst reflections on the shortcomings of VAIDS, with Oyedele emphasising that the new scheme aims to avoid repeating past mistakes.
The tax amnesty offers evaders immunity from prosecution, penalty charges, and interest, provided they voluntarily declare previously undisclosed assets and income. While the projected revenue from this new scheme remains unspecified, VAIDS, which aimed to contribute $1 billion to government revenue, fell short, collecting only about 6.6 percent of its target.
VAIDS faced numerous challenges, including inadequate data to track tax defaulters, a shortage of trained staff for effective tax administration, and widespread corruption among tax officials. Despite these setbacks, the scheme did lead to a 36 percent increase in the taxpayer database, highlighting its partial success.
Launched in 2017 under President Muhammadu Buhari, VAIDS sought to expand Nigeria’s tax base by encouraging tax defaulters to voluntarily settle arrears without facing punishment. However, enforcement remained a significant issue, with many defaulters evading scrutiny.
Critics argue that VAIDS failed to deliver on its promises, as Nigeria’s tax-to-GDP ratio remains low at 8 percent, far below the global average. Despite initial optimism, the scheme’s impact on revenue generation fell short of expectations.
Moving forward, stakeholders recommend a targeted approach, focusing on the 48 million non-compliant businesses outside the tax net. By prioritizing high-net-worth individuals and companies, authorities aim to enhance enforcement and ensure greater compliance with tax regulations.
Reflecting on VAIDS, Oyedele acknowledges its shortcomings but emphasizes the importance of learning from past mistakes. The new tax amnesty represents a fresh opportunity to address tax evasion effectively and bolster government revenue.
As Nigeria prepares to launch its latest tax amnesty, the spotlight is on its potential to correct past failures and pave the way for a more robust tax system. With greater transparency, enforcement, and stakeholder engagement, the country aims to strengthen its fiscal framework and promote economic growth for the benefit of all citizens.
