Friday 15 December 2017


Mrs. Kemi Adeosun, Minister of Finance
In this interview, the Minister of Finance, Mrs. Kemi Adeosun, throws light on how government’s global data on high net-worth Nigerians will bring everyone into the tax net by March 31 2018 through the Voluntary Asset and Income Declaration Scheme (VAIDS). Sit back and enjoy it.

Don’t you think that the March 31, 2018, deadline for the Voluntary Asset and Income Declaration Scheme (VAIDS) is too short for people to respond?
We started the programme on July 1; it’s a nine-month programme. So, as we speak, there are still four months to go, and there is enough time for anyone that really wants to comply to pick up the form. I did mine, and it took less than 20 minutes.

The typical tendency of our people is to defer things; so, if we say there’s more time, they’ll still leave it to the last minute. What we should do is to work within the time scale, there’s plenty of time between now and March, for anyone who really wants to get involved in the programme to read up on it, go through the form and do what is needed.

It’s good we are talking about expanding the tax net and more money is bound to come in, but part of the challenges Nigeria faces is the fact that fiscal decisions and programmes do not always align with monetary policies of the central bank. And fiscal policies don’t always align.

It’s good to hear the VAIDS is working, but part of the problem is that the country’s fiscal and monetary policies don’t seem to align. How much talk are you having with the CBN now, especially in the light of the presumed success of the VAIDS?
I do not agree with you when you said the monetary and fiscal policies are not aligned. What happened was that we had a major dislocation in the economy leading to a loss of about 60 percent of our income. So, you were obviously going to have some non-alignments, which every economy goes through. But we have been able to stabilise the situation and now you’re seeing more of an alignment. You know it will continue.

It’s been some months since July 1, how has the response to VAIDS been; do you really believe that Nigerians will really come out to say, ‘look, this is what I own, please assess me?’
We have had very good response from companies; so far, we have had two companies paying $110million. Before now, for example, if you lived in Lagos or you ran a company, Lagos didn’t know that you were running a business in Abuja; it didn’t know that you had a property abroad; it didn’t know that you had moved money to Dubai. At the same time, Lagos State didn’t have jurisdiction to go to those areas to claim you were resident in Lagos.

There were too many loopholes, to the extent that largely no one was really paying the right taxes, and that’s why our analysis found out that only 241 people in the whole country were paying N200,000 or more. South Africa has 950,000 people paying that amount.

Some of the richest Africans are Nigerians and we live really good lifestyles, but because the tax system was so loose, people were not paying. So, when we started to gather the data and we looked at the level of non-compliance, we were prompted to design the programme.

In jurisprudence, they say that if nine out of 10 people comply with the rule, there’s no problem with that rule. But when nine of 10 are not complying, then there’s a serious problem. That’s why we said, let’s have an amnesty so that people can just come in and do the right thing, especially now that they know we have the data.

Remember the example that I gave about someone running a business in Abuja but he is based in Lagos. Maybe, the only thing he declares is a salary; he just tells you his account to get tax clearance. So he’s declaring N500,000 a month, meanwhile he has a private jet and an expensive house; his children are abroad but government doesn’t know.

We have pulled all the data together; we’ve profiled people and engaged one of the world’s leading investigative agency. So, when we want to look abroad, we send them, they come back and say look, this is what this person has. Then, we check the tax declaring register. Once the lifestyle and the tax don’t agree, you can see that this person definitely has underpaid the tax.

You said the response has been good so far; why do you think this is the case?
It is because people know we have the data, we have proved that we have the data and we have proved that we are ready to use it. But we have given everybody till March 2018.

I wanted to appeal to the press: Let’s not call people tax evaders until March, because if they come in before March, maybe they are people that took advantage of a very weak system or they forgot, or they were not organized, or truly they never thought they would be caught. But let’s give everyone the benefit of the doubt.

After March, if people haven’t declared, then I think it’s right to call them tax evaders and we should name and shame. But the truth is the response has been very good, especially from high net worth individuals and companies because they know they have not been paying. The people are now doing the right thing. The middle-class people as well are looking at themselves and saying, “am I complying? Does my lifestyle align with what I have been declaring?” And I think it’s a good thing for the country.

Back to your question on how it helps the economy: .If we have more revenue, we borrow less but there is something more important than borrowing less. If you look at the size of our budget, if you add federal, state, and the others together, it is 11 percent of our Gross Domestic Product (GDP) — the average is about 30 percent. So we need to do more, we need new schools; we need more teachers, new hospitals, apart from maintaining the old ones. We need much more money in the budget and so we need to get everybody to do the right thing. The good thing is that it’s largely the higher net worth people and companies that have been evading, so potentially we can get quite a lot of money from this source.

Would you comment on the argument that the reason many people wouldn’t pay tax is because they do not really see much infrastructure on ground to justify such payments?
It’s a good argument but it’s a flawed one, and I will tell you why. Ninety-six percent of the people that are paying taxes today in Nigeria are working class — people, like you guys that earn a salary. That’s not fair. So, the guy outside in the hot sun directing traffic has his salary taxed. Whether he agrees or not, whether he has got immunities or not, his salary is taxed. Why are we justifying someone who has billions of naira deciding that until government does what he likes, he is not going to pay?

Some of these people interestingly pay taxes abroad because they have properties there. They pay rents abroad; their tax is deducted and they don’t complain. Nigeria is our country, and that’s why we have to change that mindset. The social contract will be strengthened and it must be done. I think when people pay tax, they’ll have interest in who runs for Senate; you will probably go and join a political party when you pay the right taxes. But as long as it’s oil money, nobody knows how much it’s worth, nobody knows what to expect; the social contract is broken.

It is very difficult to hold government accountable when you do not pay your taxes. Let me give an example: When I was in Ogun State, we had this situation with some of our roads. Lagos was collecting the taxes. I was the Commissioner for Finance and the law was very clear: You pay where you reside. So, we went to those places and we told the people, “look, your taxes are being deducted and it’s going to Lagos. Lagos are doing their roads and you will not benefit from it.” Do you know that the people chased us away? In fact, they beat up some of my staff.

So, what our government had to do was to change approach. We borrowed money and fixed the roads”. When we started doing the roads, the residents started coming to say, “No, Lagos cannot collect my money.” So, the problem is when are we going to break this cycle? If we continue with those arguments, they don’t benefit you because you are all middle-class; it only benefits the high net-worth people. These people made their money in Nigeria, not outside of Nigeria. So, why would they be able to evade tax and we justify their actions? We keep saying that government is not good. People made billions, carried them to an offshore haven and you’re saying until government is better, they should continue.

How determined is government to prosecute people after March 31, 2018, given that Nigeria is a ‘political’ country?
We absolutely are determined because if we do not prosecute, then what is the advantage of the person who did the right thing? You must prosecute people and you know the court of public opinion is the worst court. You’ll be shocked because we have about 500 letters ready and I spoke to one or two people that I know and they were begging me to just carry their letters and to them personally. People don’t want to be embarrassed.

So, you’ll be surprised that, the court of public opinion apart from any other court is the highest court. But we are ready to prosecute because tax evasion is actually a criminal offence. Interestingly, the famous gangster Al Capone (I use this example a lot) didn’t end up in prison for all the people he murdered; it was tax evasion. It is the easiest conviction because there’s no defence; you can’t defend yourself against tax evasion prosecution. We are getting ready to begin a very aggressive prosecution after March, but not before March.

Considering the capacity of our judicial system, do you also reckon that you may have to deal with a very huge number of defaulters?
That would be very disappointing, if a large number of people who should comply don’t do so, because that would really mean that this work of passing the message across has failed. We are using every means of media communication. We have videos that we send out and some of them have gone viral.

When we were designing this programme, the team went to Indonesia, Turkey, India and other countries that have done big tax amnesties. If people do not know that you have the data, they won’t comply. But Lagos State has given us their land registry; Ogun State has given us theirs as well. The FCT has given us their land registry, and then we took data from CAC, so it will be hard not to comply.

How effective would you say your communication or publicity strategy has been considering the need for the message to get to the hinterlands?
Honestly, the people in the villages are not really my problem. How much can they pay? Even after, as commissioner in Ogun, I chased them around, it was difficult to get N2000 from them. I’m not talking about people in the villages. I just gave an example of two companies paying more than $100 million. We are not talking about chasing mummy and daddy; we are talking about big people that make their money from Nigeria.

Let me give you another example: We did some analyses from the office of the Accountant General and we said, “Send us every payment of over N100 million in the past five years,” and we got the data. We then went to check with the FIRS. We discovered that, for tax purposes, government contractors under-declared to the FIRS even what they got from government, talk less of their proceeds from other businesses they are doing. The numbers don’t lie. Our tax to GDP ratio is six percent; Ghana is 15 percent. While we are at six percent, South Africa is at 24 percent. So, the numbers don’t lie, people are not just paying.

Are you not worried that you will be punishing people from March next year in Nigeria when political campaign for 2019 elections will be raging, especially with the prospective defaulters being some of the big boys that finance politics?
So, what should the timing be? Let’s get to the deadline before we start asking about extension. In the list of 500 people we wrote letters to, the people that are most worried are the politicians. They are actually the ones pushing more for this thing.

How much has been realised from VAIDS so far?
It’s not closed yet. It’s difficult to answer that question because it is ongoing. On a daily basis, forms are coming in and they have to be reviewed. It’s not just about declaring your assets and incomes; we have to review it against our database, because we know that, by their nature, people will not declare honestly. So we have to now write back to them to say, “Look, you may want to have another look at what you declared, it may not be accurate.” But we have two companies at least that I’ve given you an example of.

You have made the point that data is driving all of these; are you satisfied with the kind of co-operation you are getting from all the people who should give you the required data?
Yes. We are getting fantastic co-operation. I just spoke with all the governors and gave them an update on where we are. The governors have been very cooperative; they have given us their land registries. We then wrote to demand data on high-value cars, people who have registered G-Wagons, for instance.

The governors have been very compliant, and I think this is because it is a national programme. It has been very useful for them (the governors). Some of them had problems approaching the high net-worth people in their states because they are powerful people, but when it’s a federal programme for everybody, they are very happy for us to push the agenda.

One of the things we have found out is that high net-worth people are the ones that have responded most quickly and we have opened a window that they can come to us because some of them are very uncomfortable going to the local tax office (they have very big amount of money to pay). So, they are asking us to talk to the governor of that particular state to give them time to pay. So we’re acting also as an interface and I think that’s a good sign — that big names are asking: “How do we approach this?”

There’s this international information-sharing platform, which Nigeria has signed into. Do we really have the infrastructure to be part of that?
We are already part of it; it kicks in on January 1, 2018. It is an automatic exchange of information, which was also part of a design of this programme (VAIDS). In fact, initially, we wanted the programme to end on December 31, 2017, so that on January 1, 2018 when the automatic exchange kicks in, the programme would have ended so anyone who hasn’t declared then gets caught up.

Yes, we have the infrastructure because it is just data and the programme in the Ministry of Finance is pulling all these. It is all about data together, so we will be sharing data with them and them with us. Already, a number of countries have given us data. When we started, we spoke to the British, the Americans, we spoke to UAE. Interestingly, Canada approached us themselves to say, “you have a number of your people that have got property with us.” So there is a general global movement against illicit financial flow. I think every country is saying, “Enough is enough.” Why should people, especially the high-net-worth people, be hiding? You make your money in a country and you are not ready to contribute anything to that country; it just violates the rule of fairness. I think the general movement against illicit financial flow has helped us. We are ready. (Guardian)

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