President Muhammadu Buhari recently signed a new Executive Order 008, which the administration says is aimed at stepping up the fight against money laundering and tax evasion in the country under a Voluntary Offshore Assets Regularisation Scheme [VOARS]. According to Senior Special Assistant to the President on Media and Publicity Garba Shehu, the new Executive Order 008 would take effect on Monday October 8th 2018 the very day it was signed by the President.
As clarified by Shehu, under the VOARS, Nigerian tax payers who hold offshore assets and incomes (located in foreign countries) have a grace period of 12 months to voluntarily declare such and pay tax on them in Nigeria. Where such Nigerians comply, they become eligible to some benefits including exemption from prosecution for tax evasion. In specific terms any such holder of offshore assets that voluntarily complies shall pay a one-off levy of 35% on such assets. On the other hand, defaulters of this order would pay all outstanding taxes, penalties and interests which a forensic audit of such assets would verify.
Further clarification on Executive Order 008 holds that defaulters of this order shall at the expiration of the 12-month grace period be exposed to investigation and enforcement procedures concerning offshore assets anywhere in the world, on the basis of international legal procedures with respect to taxation of such offshore assets and incomes. To add teeth to the scheme the Federal Government is setting up a VOARS office in Switzerland.
Garba’s statement outlined the reach of Executive Order 008 as spanning all categories of individuals and corporate entities that even owned assets under consideration which for Nigerians constitute a significant number in the net. Typical inclusion in the net are Nigerian banks, sundry businesses, individuals who could have schooled or worked abroad, as well as professionals who are beneficiaries of trans-border income and fund transfer.
It is significant that Garba Shehu’s statement cited the high incidence of money laundering and tax evasion in the country as the primary impetus for the order. The issue of implementation however raises serious concerns. Not a few observers see it as an overtly ambitious initiative by the Federal Government given its manifest incapacities with respect to tax administration within the borders of the country. It is no mystery that tax administration in the country in which the government at various tiers has statutory control poses significant challenges with respect to policy consistency, valuation of taxable entities and even collection of collectible revenue. It constitutes a riddle how venturing into the widely strange terrain of international assets domiciliation, valuation and taxation would be easy.
Secondly, although the government may be counting on advancement in IT enabled information flow on foreign assets, there are significant geopolitical factors that may not facilitate an easy passage of its initiative on the global stage. Presently there is no universally accepted protocol on the terrain of managing taxation of offshore assets and incomes even among the relatively advanced member countries of the Organisation of Economic Co-operation and Development (OECD) of which Nigeria is not even a member.
Coming back home, for reasons easily associated with the government’s habitual poor management of information on its critical initiatives, VOARS is seen largely as an attempt at double taxation by the administration since under normal circumstances such designated assets and incomes would be taxed in their countries of location. Ordinarily, it is a welcome development that the government is stepping up its efforts at promoting tax compliance in the country and has made significant progress in that direction. But allowing its enthusiasm to take a better part of its judgement and indulging in knee jerk initiatives such as the apparently hurriedly concocted VOARS is counter-productive. VOARS should be reviewed to earn for it a better chance of success.