October 2, 2018
On 24 April, 2008, American movie star, Wesley Snipes, was convicted and sentenced to 3 years in prison for failing to file income tax returns. This sent shock waves across the Hollywood community as other movie stars and celebrities scampered to review their tax records and ensure up-to-date compliance in order to avoid a similar fate.
Since then, many other celebrities and super stars have had similar run-ins with the tax authorities. The famous singer, Lauryn Hill, served a 3-month jail term in 2013 while Joseph Cartagena, “Fat Joe”, also served a 4-month jail term in the same year for tax related offences. More recently, professional football super stars, Lionel Messi and Christiano Ronaldo were the focus of various tax investigations. When it was resolved, Messi paid €12 million and got a 24-month suspended sentence, while Ronaldo paid €17million and got a 2-year suspended sentence. There is a lot to learn from the experiences of these stars.
Although such high-profile tax cases are not common in Nigeria, it is safe to say that the tax environment is changing very fast. Tax compliance has indeed become a very important issue as a result of government’s renewed focus on taxation.
Due to paucity of funds across all levels of governments, taxation has become the only sustainable way of growing government revenue. The traditional reliance on revenue from natural resources is not sustainable as it is clearly inadequate and subject to many factors outside government’s control. Nigeria’s tax to GDP ratio of about 6% is quite low and indicates that a significant portion of the economic activities in the country is not captured within the tax net. The tax authorities realize this and have been ramping up efforts to increase tax collection. This is evident in the increased aggressiveness in enforcement and public enlightenment campaigns.
In terms of availability of information, the Nigerian tax authorities now have an unprecedented level of data on the economic activities of Nigerians. In 2017, the Federal Ministry of Finance commissioned a data mining project (“Project Lighthouse”) to obtain relevant information to profile potential tax payers. Data was gathered from various sources such as Bank Verification Number,
Land Registry, Forex applications, Nigerian Customs, vehicle registration registry, Corporate Affairs Commission etc. This enabled them to extract actionable intelligence which can be used in prosecuting defaulting taxpayer.