Experts seek clarification on Executive Order to combat money laundering, tax evasion
Following the recent signing into law, of a new Executive Order backing the implementation of the Voluntary Offshore Assets Regularisation Scheme (VOARS) by the Federal Government of Nigeria, finance experts are frowning and seeking clarification on the move.
The Scheme which took effect from October 8, 2018 and will cover a period of 12 months, is aimed at combating money laundering and tax evasion.
Under VOARS, Nigerian taxpayers who hold offshore assets and generate offshore incomes are encouraged to voluntarily and truthfully declare those assets and incomes for which no prior taxes were paid. They are also encouraged to make a one-time payment of 35 per cent on the total value of the offshore assets or undergo a forensic audit of the offshore assets and pay all outstanding taxes, including penalties and interest.
But in a note to clients, a tax consultancy and advisory firm, Delloite Nigeria said that while this is a good development, implication of VOARS on taxpayers that took advantage of the VAIDS Scheme is unclear. It is also not clear what period the assessments would cover and how far back the audits and investigations would go.
“We expect that the Federal Government will provide more information that will clarify these issues as soon as practicable.
“In the meantime, taxpayers are advised to review the components of their offshore assets and incomes to ascertain potential tax exposures that may arise there from and settle any outstanding taxes or take advantage of the Scheme by making a one-time payment of 35 per cent on the total value of the offshore assets,” the firm suggested.
Also, the pioneer Managing Director of the Assets Management Corporation of Nigeria (AMCON), Mr Mustafa Chike-Obi described it as another ridiculous policy, adding that it will discourage those living abroad from investing in Nigeria.
“If say USA reciprocates and taxes US residents for owning property in Nigeria, it will discourage diasporans from investing in Nigeria at a time we need foreign investment the most. Not well thought out as usual,” he stated via his Twitter handle.
According to the Order, in exchange for participation in the Scheme, the defaulting taxpayers will enjoy immunity from prosecution for tax offences and offences related to the offshore assets.
“Defaulting Nigerian taxpayers who fail to take advantage of the Scheme will be required to undergo investigation and enforcement procedures concerning offshore assets held by them upon the expiration of the Scheme,” the tax advisory and consultancy firm stated.
This will be based on information obtained by the government through automatic exchange of information between Nigeria and foreign countries where the assets are located.
The Scheme is open to all persons, companies and their intermediaries holding offshore assets and are in default of their tax obligations, including those who are not already under investigation by law enforcement agencies in Nigeria or any other country and those who have not been charged with any crimes (ranging from theft of public funds to obtaining the assets through corrupt practices). The Federal Government intends to set up a VOARS in Switzerland for all categories of taxpayers who have defaulted in declaration of their offshore assets and payment of taxes due further to the terms and conditions of the Order.
It will be recalled that the Federal Government introduced a somewhat similar amnesty scheme in 2017 – Voluntary Asset and Income Declaration Scheme (VAIDS), which
enjoyed large participation leading to significant increase in tax revenue,
expansion of the tax net and increased voluntary compliance with tax obligations.
VOARS is therefore expected to have a similar effect while also facilitating the regularization of offshore assets connected to Nigeria.