Tax amnesty programs are becoming popular in some African countries
In June and July 2018, Tanzania and Angola introduced tax amnesty programs. In Tanzania, an order issued on June 30 required taxpayers to voluntarily declare their outstanding tax bill, and pay same within the 2018-19 fiscal year in return for forgiveness of interest and penalties. The order became effective on July 1, 2018 and expires December 31, 2018. Similarly, in July 31, 2018, the Angolan government posted a law requiring taxpayers to voluntarily declare and repatriate foreign assets within 180 days of the law coming into force. In return, taxpayers will be free from criminal prosecution. The law came into force on June 26, 2018.
The tax amnesty program was also introduced in Nigeria in June 2017. It was initially scheduled to expire on March 31, 2018, but the deadline was extended until June 20, 2018. Within 11 months of the program’s implementation, the federal government received NGR 30 Billion (approx. USD 83 Million) from individual and corporate taxpayers who voluntarily declared their assets. Additionally, Nigeria experienced an increase in number of taxpayers from 14 million in May 2017 to over 19 million in May 2018. Unfortunately, since its expiration, no measures were taken against non-compliant taxpayers. According to the National Bureau of Statistics, Nigeria has a labor force of 85.08 million persons. From this figure, 77.55 million engage in some sort of economic activity. Of the 77.55 million, 69.09 million persons are employed and underemployed. Of the 69.09 million, 17.88 million work for pay, 45.47 million are self-employed and 779 thousand are paid apprentice. This implies that 24.5% (19 million out of 77.55 million) of the economically active population pay tax. Improved enforcement mechanisms need to be implemented to increase this number.
Without any consequence for default, tax amnesty programs may merely be a sensitization tool used by governments to encourage tax compliance. Thus leaving taxpayers with the option of complying or not. A best practice in implementing tax amnesty programs is ensuring that tax authorities have adequate capacity for domestic enforcement of the program. Governments thinking of rolling out tax amnesty programs must also ensure taxpayers understand the costly implications of default; else, such programs might not achieve much in the future.