VAIDS (Voluntary Asset and Income Declaration Scheme): A Tax Compliance and Revenue Generation Tool

PUC Journal, October 2017
PUC Journal

In a bid to provide alternative revenue sources, in view of the dwindling oil revenue occasioned primarily by the fall in crude oil price and to make good its promise to diversify the economy, the Federal Government of Nigeria, through the Acting President, Prof. Yemi Osinbajo, recently issued an Executive Order (“Order”) mandating the Federal Ministry of Finance to set up a Voluntary Asset and Income Declaration Scheme (“VAIDS” or “Scheme”).

The Order, which is aimed at expanding Nigeria’s tax base and improving the low tax to Gross Domestic Product (“GDP”) ratio (currently about 6%), flows from the earlier approval of the National Tax Policy (“NTP”) in February 2017 by the Federal Executive Council and the subsequent approval-in-principle of the scheme by the National Economic Council (“NEC”). Thus, the NTP establishes fundamental principles which guide in the systematic development of the Nigeria tax system and reinforces the need for tax laws and administrative practices to promote economic development. Hence, it provided the foundational framework for the Scheme.

Nigeria’s Tax to GDP ratio is reportedly one of the lowest in the World and according to reported statistics released by the Federal Inland Revenue Service (“FIRS”), the total number of registered tax payers in Nigeria is about 20% of the average number of people engaged in productive activities in the country. The objective of the Scheme is therefore to address amongst other issues, the abysmally low tax to GDP ratio in the country and to provide the opportunity and encourage eligible tax payers to:

(a) regularise their tax status for the past six years of assessment;

(b) pay all outstanding taxes;

(c) prevent and stop tax evasion; and

(d) ensure full tax compliance


The Scheme applies to all persons and business entities in default of their tax liabilities and covers assets and income from sources within and outside Nigeria. As noted in the proviso to paragraph 11 of the Order, the rights and status acquired by any participating taxpayer pursuant to the Scheme shall vest to the benefit of the taxpayer to the extent provided by law.

It is possible for one to argue that the Scheme should only apply to those taxes administered by the FIRS given that the Order was issued by the Federal Government and considering the Constitution of the Federal Republic of Nigeria clearly delineates powers of the Federal from the State Governments. It appears however and commendably so, that the benefits under Scheme are available in respect of all taxes administered by the FIRS as well as those administered by all State Boards of Internal Revenue.

A possible explanation for the overreaching and all-encompassing nature of the Scheme is not far-fetched starting with the seemingly centralized nature of legal regime for taxation in the Country coupled with the involvement of the States in the formulation of the Scheme. As noted earlier, the NEC, which gave the initial approval-in-principle to the Scheme, prior to the issuance of the Order by the Acting President, has as its members, all the Governors of the 36 States in Nigeria and the Governor of the Central Bank of Nigeria. Thus, by granting approval in principle through the NEC, the States Governors, on behalf of their States, seem to have sanctioned the Scheme.

To further buttress the involvement of the States, the preamble to the Order clearly states that the Scheme was consequent upon “the determination of the Federal and State Governments to provide an opportunity for taxpayers who are in default under all relevant Statutes to voluntarily declare their Assets and Income and pay taxes”. Similarly, taxation is an item in the exclusive legislative list and the Federal Government plays a supervisory role over tax matters.

As a demonstration of the harmony that exists between the Federal Government and the federating units, the FIRS Chairman, Mr. Babatunde Fowler, recently stated at the 138th Quarterly Meeting of the Joint Tax Board that there is a Memorandum of Understanding adopted between the FIRS and State Internal Revenue Service in respect of VAIDS which has been working effectively.

He further stated that all the money generated from the Scheme will be shared between the three tiers of government. Notwithstanding the wide scope of the VAIDS, the implementation of the Scheme across the various States will not pose any difficulty given the reported collaboration that exists amongst the three tiers of Governments.

It is however not clear to what extent the rights provided in Scheme are affected by existing tax legislations. The proviso to paragraph 11 of the Order provides that “any rights and status properly acquired by any participating taxpayer pursuant to the Scheme shall vest to the benefit of the taxpayer to the extent provided for by law.” Paragraph 12 of the Order goes ahead to add that the Order shall be read in conjunction with all the extant Tax Laws, Regulations and Guidelines as well as those issued pursuant to the Scheme. Thus, understanding the full extent of the Scheme and how it can be implemented vis-à-vis the extant tax laws, will require a more comprehensive review of the existing tax legislations and regulations both at the Federal and State levels; an exercise which is beyond the scope of this write-up.


The following are the major provisions of the Scheme:

  • Duration: The Scheme takes effect from 01 July 2017 and will run for a period of 9 months. In effect, the Scheme is expected to lapse on 31 March 2018 and the tax payers who are in default of their tax obligations are given this window of opportunity to declare their assets and incomes from sources within and outside Nigeria relating to the preceding six (6) years of assessment.
  • Eligibility to Participate: The Scheme is open to all persons and entities in default of their tax liabilities such as:
    • Those who earn incomes or own assets but yet to register with the relevant tax authorities;
    • Registered taxpayers who have additional disclosures to make or need to amend prior disclosures;
    • Registered taxpayers who have not been filing returns;
    • Persons who have not fully declared their taxable income and assets;
    • Persons who have been underpaying or under remitting their taxes;
    • Persons who are under a process of tax audit or investigation with the relevant Tax Authority; and
    • Persons who are engaged in a tax dispute with the relevant Tax Authority but are prepared to settle the tax dispute out of court.

Notwithstanding the general applicability of the Scheme to all taxpayers (Federal and State taxes), an applicant is however, required to fulfil certain preconditions in order to validate any application made under the Scheme. Such mandatory requirements are that the applicant must have made a voluntary disclosure which must be full, frank, complete and verifiable in all material respects. In terms of the form, the disclosure must be made using the VAIDS Form or in any other form or manner as may be prescribed under the Scheme. Lastly, the assessment of the tax payable must be carried out by relevant tax authority.

It is important for applicants to take note of these requirements as any disclosure that runs afoul of same may be declared invalid and the applicant may be denied the benefits that should ordinarily inure to a valid applicant.

  • Benefits and Reliefs for Voluntary Disclosure:

As a form of tax amnesty, any taxpayer who truthfully and voluntarily declares his assets and incomes, complies with regulations and guidelines made pursuant to the Scheme, and pays all outstanding taxes shall be entitled to the benefits provided under the Scheme. Amongst those benefits are immunity from tax audit and prosecution for tax offences, waiver of interest and penalties on unpaid taxes and the option of spreading payment of outstanding liabilities over a maximum period of three years as may be agreed with the relevant tax authority. The waiver however, is without prejudice to any court order or judgment already obtained in respect of any accrued interest or penalty.

A Taxpayer who volunteers information under the Scheme is equally guaranteed of confidentiality of such information to the extent permitted by law and any tax official or authorised person who breaches the confidentiality of information received or exchanged under the Scheme without due authorisation shall be liable to prosecution under the relevant law. It is important to note that the protection of confidentiality as stated above is in line with Section 38(2) of the Personal Income Tax (Amendment) Act 2011, Section 5(1) of the Petroleum Profit Tax Act 1990, Article 26 of the Double Taxation Relief Order between Nigeria and certain countries [1] which all provide that a member of the relevant tax authority shall treat tax information confidentially and only disclose as provided by law.

  • Consequences of Failure to utilize the Opportunities under the Scheme: Though the language of the Order is couched in a voluntary tone, failure of a defaulting taxpayer to truthfully and promptly take advantage of the Scheme within the 9-month period carries with it some consequences. Defaulting taxpayers will be liable to pay in full, the principal sum due as tax liabilities together with all interests and penalties arising in default of payment.

[2] As would be expected, the defaulting taxpayers will also be liable to be prosecuted for tax offences under the relevant tax laws. Where any tax reliefs have been granted to the tax defaulter, those reliefs will be withdrawn and the defaulter will be subjected to comprehensive tax audit. However, where a defaulting taxpayer has paid any sum in relation to the Scheme, such sum may be counted as part payment of any further outstanding tax in respect of undisclosed information.

It follows that two categories of defaulters are envisaged under the Scheme. First, those who out rightly fail to participate in the Scheme. Second, those who participated but fail to truthfully and promptly declare their liabilities in the terms of the Scheme. The consequences are the same for both defaulters except that in the case of the latter defaulter, where he has paid any sum in relation to the Scheme, such sum may be counted as part payment of any further outstanding tax in respect of undisclosed information.


The VAIDS has laudable provisions which afford a window for tax offenders to remedy their positions by providing limited amnesty to enable voluntary declaration and payment of liabilities. The tax reliefs, opportunity and incentives offered by the Scheme will encourage defaulting taxpayers to discharge their statutory obligations.

On the part of the Governments, the Scheme will go a long way in boosting their shrinking earnings even beyond the USD1 Billion estimated tax revenues. Moreso, the Scheme will help expand Nigeria’s tax base and improve the low tax to GDP ratio and equally curb the use of tax havens for illicit fund flow and tax avoidance.

However, given the short life span of the Scheme, aggressive awareness is needed to educate the potential beneficiaries most of whom are rural and semi-rural dwellers and who may not even be aware of the available incentives, on the importance of the Scheme. Beyond the VAIDS, Governments at all levels must show transparency, accountability and responsibility as people will be more inclined to pay taxes when public funds are being properly utilized.


[1] Belgium, France, Canada, Netherlands, and Romania

[2] In this vein, it is important to note that failure to remit taxes administered by the FIRS is set at a penalty/default rate of 10% per annum of the unremitted sum and interest at the prevailing Central Bank of Nigeria minimum re-discount rate and imprisonment for period of not more than three years. (Section 40 FIRS (Establishment) Act F36 Laws of the Federation of Nigeria 2004.

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