Tuesday 11 May 2021
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How to entice tax compliance


There has been a lot of discussion and articles in the press relating to tax compliance and enticing taxpayers to comply with the tax legislation in Namibia. The Ministry of Finance has embarked on facilitating Taxpayer Education Days to assist taxpayers in complying with the legislation applicable in Namibia. We have read and seen various discussions on the much publicised “Panama Papers” and a lot has been said about capital flight from countries in Africa. The question that we must ask is: “Is this truly the answer to enticing tax compliance?” Tax and matters relating to tax usually creates a lot of strong worded discussions between members of the public and there is a general feeling of resistance to tax from most people when the topic is discussed. Why is that? We are of the opinion that tax compliance will be easier when the following matters have been addressed:

When taxpayers can see that the spending of the tax funds are done prudently and by addressing the needs of the country. When discussions are held and arguments are made to build a new parliament building, one starts to wonder. When one sees all the new governmental buildings being built across Windhoek, while old government buildings are left dilapidated and unoccupied, one wonders. When we have a serious water infrastructure shortcomings and spending on a resolve is just being discussed and not done, one wonders. When taxpayers can see that tax compliance are enforced consistently and not only on those that are already registered. Ensuring that all entities and persons that should be paying tax are actually registered should be prioritised at this stage. Tax changes proposed during the budget speech should be promulgated timely and not be delayed. Legislative changes should be done after public consultation and by ensuring that the wording used in these changes are practical, enforceable and all comprising. Press Releases threatening taxpayers with legal action if their tax accounts are not up to date and sms messages being sent to taxpayers that list outstanding returns when the taxpayer know that these have been submitted but have not been processed is not conducive to ensuring tax compliance.

Timely refund of income tax credits and VAT credits will go a long way in enticing taxpayers to want to comply with legislation. A lot have been said about enforcing stipulations like transfer-pricing and thin capitalisation legislation and performing audits in this regard on taxpayers. The concern is that these stipulations are highly technical and difficult to enforce. Are the audit teams that will be doing these investigations properly trained and technically equipped to perform these audits. We are of the opinion that consistent enforcement of the current legislation applicable in Namibia on everybody will render more income than trying to enforce transfer-pricing. There are various stipulations in our current legislation that are not being enforced and that should be addressed first. It will also be a lot easier to enforce these, with limited costs involved, than enforcing more technical matters as a first port of call. We have been very critical in the comments above, but all is not doom and gloom. There are people that are really trying to make a difference in this regard. The challenge is that this must be a concerted effort from all parties and not only some. Taxpayers must feel that everybody is treated the same and that when their affairs are investigated or inspected that they will treated consistently and within the legislative boundaries applicable. There are a lot of knowledge available in Namibia relating to tax and Inland Revenue should use the knowledge base available to assist them in enticing tax compliance. Working together will be more beneficial than trying to work against each other.

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