Executive Order 008: Executive Order Against Money Laundering And Tax Evasion (VOARS) -By Adedoyin Adeniran

Filed under: National Issues |

8 October 2018 remains a memorable day in the history of our great nation Nigeria as the President Muhammadu Buhari signed another Executive Order (008) to curb the problem of money laundering and tax evasion in the country. The order is titled Voluntary Offshore Asset Regularization Scheme (VOARS) and its target is to eradicate the activities of tax evaders and money launders and to boost the country’s locally generated revenue.

The VOARS aims at making Nigerian taxpayers who hold offshore assets and incomes to within a period of 12 months, declare those assets voluntarily and pay taxes on them.

 

 

The questions that come to mind here should be

  • who is a tax payer?
  • What are offshore assets?

A tax payer is an individual or business entity that is obligated to pay taxes to a federal, state, or municipal government body. It can also mean the workforce of a country who pay for government projects through taxation.

Offshore assets mean assets in a location outside of one’s national boundaries, whether that location is land or water-based e.g. foreign banks, corporations, investments and deposits.

Having understood the meaning of a tax payer and offshore asset we can bring the aim of VOARS to perspective on its legality, acceptance, effect and enforceability.

For the avoidance of doubt the Federal government clearly stated the scope of application of VOARS;

“all persons, entities, and their intermediaries holding offshore assets and are in default of their tax obligations in any way, including those who are not already under investigation by law enforcement agencies in Nigeria or any other country and have not been charged with any crimes including theft of public funds or obtaining offshore assets through corrupt practices.”

Going by the above scope, this means that the order mainly applies to persons that are already under investigation or charged with crimes but in its extension,  it gives opportunity to persons who have not been charged or investigated for any criminal offence to also clear whatever tax they can assess on their offshore assets and pay default payable within the stipulated time.

This order further sets out a time limit for individuals or corporation with offshore assets to conduct self-assessment[1] and pay the amount due or 35% on all the asset owned within the period of 12 months. Few months ago, the Federal Government in their bid to ensure tax payment introduced Voluntary Asset Declaration Scheme (VAIDS) which gave a stipulated time for taxpayers to declare their assets and pay all tax due on them and this helped in tracking the tax payment rate and defaults in the country.

To ensure a coherent implementation of this order the Federal Government and some other foreign countries had in January 2018 commenced the Automatic Exchange of Tax Information (AETI) which gives the Federal Government access to information and data on overseas(offshore) asset and foreign accounts held by Nigerians abroad. This will be the platform upon which foreign asset tax evaders will be apprehended and punished accordingly should they fail to take advantage of the scheme while it lasts.

Nigerian taxpayers should be well informed now that hiding information is no longer tax planning therefore, working on the assumption that the tax authorities will not find out is a strategy that is very likely in its dying days. You need to have another look at your tax affairs and be sure that you are not setting yourself up for a significant tax liability soon. The AETI addresses tax evasion, tax havens, offshore financial centres, tax information exchange agreements, double taxation and money laundering.

Also, the Federal Government, through the office of the Attorney-General of the Federation and Minister of Justice has planned to set up a VOARS in Switzerland for all categories of taxpayers who had defaulted in the declaration of their offshore assets, payment of taxes due and collectible in accordance with the provisions of the order.

The VOARS scheme will operate like a pardon on all defaulters with respect to charges(trial) on tax evasion. Two things must be borne in mind concerning tax, namely, the payment is compulsory as the government has the force of law and can coerce people into paying it, and that it is only government that can levy taxes which it does through various government agencies.

The punishment of tax evasion ranges from;[2]

  1. Imprisonment up to five years
  2. 100% of the outstanding tax due
  3. Compound interest at 21 per cent per annum
  4. Forfeiture of assets

To conclude on this, there are some terms to be considered;

  1. tax evasion
  2. money laundering

Tax evasion as the wilful attempt to defeat or circumvent the tax law to illegally reduce one’s tax liability[3]. Most times Tax Evasion entails taxpayers (which could either be a company or an individual) deliberately misrepresenting the true state of their affairs (business) i.e. their income and the expenditure to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts earned, or overstating deductions which amounts to an offence[4] while Money laundering is the act of concealing the transformation of profits from illegal activities and corruption into ostensibly “legitimate” assets.

The measures put in place under this order makes the fight against money laundering and tax evasion feasible, but we cannot only dwell on its feasibility; we have to move to the place of actualization where citizens pay tax voluntarily.

 

Written by:
Adedoyin Adeniran
Niji Oni and Co

[1] Sections 55 of the Company Income Tax Act

[2] Section 92 Company Income Tax Act 2007

[3] Sections 96 of the Personal Income Tax Act

[4] Sections 76(4) of the Personal Income Tax Act

 

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