President Buhari’s new executive order on foreign assets, explained

This is an Executive Order

As the name implies, an order is termed ‘executive’ when the executive arm of government issues one without consulting the other arms of government in the legislature and the judiciary.

All presidents across the world issue executive orders and are allowed the prerogative to issue one once in a while.

Now that we are done with explaining what an executive order really is, what is this VOARS and what does President Buhari aim to achieve with it?

What is an offshore asset?

An offshore asset is an asset that is situated abroad.

An offshore business is a company that is registered abroad by a citizen of another country as a way of dodging taxes in his own country.

Offshore companies are registered abroad in order to take advantage of lower taxes or operating costs in a foreign land.

Offshore companies are registered because the business owners want to take advantage of less stringent business regulations in another operating climate.

If for instance, Nigeria taxes my business way too much for my liking and I really don't want to pay taxes to Nigeria, I could go register that new business in the Island of Panama for instance; where taxes are cheaper and where the ease of doing business may be better. When this happens, my business or company will now be called an 'offshore asset'.

Do you get it now?

So why is Buhari doing this?

President Buhari won the 2015 election partly on the back of a promise to tackle corruption or graft in Africa’s most populous nation.

Offshore financial institutions can be used for illicit purposes like money laundering and tax evasion.

What has been happening is that some very rich and powerful Nigerians have been setting up companies in countries like the Cayman Islands, British Virgin Islands, Panama, Singapore, Switzerland, The Bahamas, Seychelles etc.

These countries are called Tax Havens because in some of them, you don’t get to pay income tax, wealth tax or value added tax while running a business there.

I’m sure you are now familiar with the Panama or Paradise Papers? In 2016 and 2017, a team of investigative journalists around the world issued a trove of documents containing the names of powerful people who have set up companies in offshore Tax Havens.

The likes of Wale Tinubu, Bukola Saraki, David Mark, Wale Adenuga, James Ibori, Sayyu Dantata and Adetokunbo Sijuwade among others,were named in a long list of global players who have been setting up offshore businesses in Tax Havens.

With the VOARS, President Buhari wants to ensure that these Nigerians who set up businesses in offshore countries declare their businesses and pay a fraction of the taxes on those businesses to their motherland.

Buhari’s spokesperson, Garba Shehu, puts it this way: “any taxpayer who truthfully and voluntarily complies with the conditions of the scheme, pays a one-time levy of 35 percent on the total offshore assets or pays all outstanding taxes, penalties and interest after forensic audit of their offshore assets and income, shall obtain immunity from prosecution for tax offenses and offences related to offshore assets, among others”.

And there will be penalties for offshore businessmen who do not comply, according to the presidency: “Equally, failure of any defaulting taxpayer to take advantage of this scheme shall, at the expiration of the scheme result in investigation and enforcement procedures concerning offshore assets anywhere in the world pursuant to information now readily available through automatic exchange of information between Nigeria and foreign countries”, Shehu added in his statement.

What the presidency is saying essentially to offshore businessmen is this: ‘declare your offshore business and pay us a fraction as tax. Also, pay a one time levy on the business. If you don’t, we will come after you and prosecute you for using your business to launder the money you made in Nigeria’.

Buhari says he is only doing this to fight corruption

Here’s how the president puts it: “I have signed a new Executive Order (EO 008), the Voluntary Offshore Assets Regularization Scheme (VOARS), mandating Nigerian taxpayers who hold offshore assets and incomes to, within a period of 12 months, voluntarily declare those assets and pay taxes on them.

“We are stepping up the fight against corruption, targeting money laundering and tax evasion”.

So, what do you make of the president’s new anti-corruption plan? Yay or Nay?