• Wednesday, April 24, 2024
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How about tax amnesty?


 Innovation is driving revenue collection globally in the face of slow growth rate in trade and investment. More and more tax administrators are coming up with diverse products to raise government revenues to meet daunting challenges. In Nigeria and much of the frontier markets, voluntary tax compliance is still a mirage and special efforts needs to be employed to curb it. Whereas, in developed nations taxpayers remit voluntarily, allowing the tax administrators time and space to develop new tax types such as carbon tax, green gas tax, among others, but one innovation that stands out from this pack, even in developed countries, remains Tax Amnesty.

In Nigeria, amnesty as become a cliché, so to speak in view of the conflicts in the Niger Delta and the North East.

Amnesty as we know, is a legal forgiveness from certain infractions. Tax Amnesty is defined as a waiver or reduction and sometimes removal of penalties in back taxes to encourage defaulting taxpayers to pay what they owe within a specified window. Indeed, like on criminal matters, majority of eligible taxpayers in Nigeria rarely remit their taxes and it is crucial we find a common ground to achieve the objective of the government to raise funds from taxes through some ingenious means that works with our cultural and economic landscape.

The objective of tax amnesty is to forgive or negotiate the tax liabilities of individual and corporate tax payers in line with laid down statutes. An amnesty must necessarily have a legal or legislative backing for it to take effect with a cut off date. Amnesty will not completely knock off the penalties for deliberate tax infractions, but will seek a possible relaxation of some of these penalties to encourage the expansion of the tax net, albeit temporary. And one key demand will be an agreement between the taxpayer and the tax administrator to file future returns on time in the future.

A major challenge, which the Federal Inland Revenue Service (FIRS) and various State Boards of Internal Revenue (SBIR) contend with, is the issue of mounting tax arrears. In some cases, the companies have collapsed while the going concerns are not complying as and when due. While the tool of enforcement should not be replaced with amnesty completely, it is however a tool that can be deployed to increase revenue collection. Amnesty or some form of relief will certainly encourage defaulting taxpayers to negotiate their tax debt obligations with respective collecting agencies, which will then enable them to start on a clean slate.

It implies that a taxpayer who has enjoyed the magnanimity of amnesty will not be qualified more than once and stiffer penalty can then apply to such a taxpayer in the future in the event of a default. It must also be taken into account that not all defaulting taxpayers do it deliberately.