In line with global efforts to checkmate tax evasion, Nigeria has mandated individuals who fall under a specified reportable persons category to register their data in a Self-Certification Form.
The Self Certification form is basically to be administered on these persons who are often non-residents and other persons with residence for tax purposes in more than one jurisdiction or Country, believed to hold accounts in Financial institutions that are regarded as “Reportable Financial Institutions.”
‘Crux of The Matter’
As the world becomes increasingly automated, digital initiatives to promote tax compliance among individuals, globally, have been the forefront of global leaders and industry experts. One of such initiatives is the Automatic Exchange of Information.
The world is expected to be synchronized by a global database containing taxpayers’ information. It can provide timely information on non-compliance where tax has been evaded either on an investment return or the underlying capital sum, even where tax administrations have had no previous indications of non-compliance.
Global leaders under the aegis of the Organisation of Economic Cooperation and Development have pushed for this cooperation among governments, since 2012. Let’s look at a brief Timeline.
‘A Brief Timeline’
Following political discussions around it, in 2012, on the 19th of April, 2013, the G20 Finance Ministers endorsed automatic exchange as the expected new standard.
On 19th June 2013, the G8 Leaders welcomed the Organisation for Economic Cooperation and Development (OECD) Secretary General report “A step change in tax transparency” which set out the concrete steps that needed to be undertaken to put a global model of automatic exchange in practice.
On the 6th of September 2013, the G20 Leaders committed to automatic exchange of information as the new global standard and fully supported the OECD work, with G20 countries, aimed at presenting such a single standard in 2014.
On February 23 2014, the G20 Finance Ministers endorsed the Common Reporting Standard for automatic exchange of tax information, now contained in Part II of the full version of the Standard.
On the 6th of May 2014, the OECD Declaration on Automatic Exchange of Information in Tax Matters was endorsed by all 34 member countries along with several nonmember countries. More than 65 jurisdictions publicly committed to implementation, with more than 40 having committed to a specific and ambitious timetable leading to the first automatic information exchanges in 2017 (early adopters).
In July 2014, the OECD released the full version of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. The Standard calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.
The Standard was approved by the OECD Council on 15 July 2014.
On the 29th of October 2014, 51 jurisdictions, 39 of which were represented at ministerial level, signed a multilateral competent authority agreement to automatically exchange information based on Article 6 of the Multilateral Convention.
Subsequent signatures of the agreement, including a signing ceremony in the margins of the OECD Ministerial meeting (June 2015), brings the total number of jurisdictions to 61. This agreement specifies the details of what information will be exchanged and when, as set out in the Standard.
‘A Plus for Nigeria’s Economy? ‘
The FG’s decision to commence automatic exchange of taxpayer’s information between Nigeria with other countries will enable government obtain information from other countries regarding financial information about Nigerian residents.
Prominent Tax Expert, Taiwo Oyedele, opined that: “The mere fact that govt is asking Nigerians to provide this declaration is a reflection that the country poorly handles data management. The same reason why many countries were able to easily administer palliatives to their citizens during this pandemic and we could not.”
He, however, affirmed that the initiative would ultimately lead to better tax compliance for Nigeria.
Likewise, prominent tax researcher and global thought-leader, Andres Knobel, opined that the “Automatic Information Exchange (AIE) is a vital transparency tool that could help developing countries, like Nigeria, tackle illicit financial flows worth trillions of dollars that end up hidden in the financial centres of many OECD countries and other tax havens.”
While all fingers point towards improved economic gains, the only extant arguments against the Automatic Information Exchange is Nigeria’s lack of capacity, in terms of limited resources to analyse and send information and lack of IT technology or electronic records.
‘FG Clarification’
In the wake of widespread confusion over the information gathering process of the taxpayers’ information, the Federal Inland Revenue Service (FIRS) clarified that the Self Certification form is basically to be administered on Reportable persons holding accounts in Financial institutions that are regarded as “Reportable Financial Institutions” under the CRS.
It explained that Reportable persons are often non-residents and other persons who have residence for tax purposes in more than one jurisdiction or Country.
Also, Financial Institutions are expected to administer the Self Certification form on such account holders when information at its disposal indicates that the Account holder is a resident for tax purpose in more than one jurisdiction.
“The information that indicates an account holder is a resident for tax purposes in more than one jurisdiction, is expected to be available to Financial Institutions during account opening processes for the KYC and AML purpose.”
Recall that the FIRS had earlier informed taxpayers regarding the commencement of exchange of information with other countries.
The message read: “We are delighted to inform you that the AEOI-CRS (Automatic Exchange of Information – Common Reporting Standards) System Portal has gone Live!
“All Reporting Financial Institutions are expected to file reports on or before 30th September 2020.
“The designated official of each Financial Institution is required to enroll on the AEOI-CRS System Portal, as a Primary user, to enable the Financial Institution, file its CRS reports.
“To enroll as a Primary user and have access to related AEOI-CRS documents, please visit the FIRS website at https://t.co/mmMsJE6zNa and navigate the menu tab on Automatic Exchange of Information.”
