Dodging the taxman has just become harder for contractors, as the Inland Revenue Department has directed government agencies and parastatals to demand that any invoice issued by contractors for payment be accompanied by a valid certificate of good standing issued by Inland Revenue before any payment is made.
Government continues to lose millions of dollars in undeclared income and unpaid taxes yearly, a situation which has prompted the Inland Revenue Department to review its good standing policy by attempting to recover tax owed by businesses even before the money gets to the contractor.
The directive, which was issued this week, was sent to all ministries, government agencies, regional councils, town councils and parastatals by the Inland Revenue Department’s head, Commissioner Justus Mwafongwe.
“If any contractor or service provider does not provide a valid certificate of good standing at the time of claiming any payment for work done or service rendered for your institution such payment should not be made. Any contractor or service provider who fails to provide a valid certificate if good standing must be referred to IRD in order to get a letter indicating how much tax arrears are to be withheld and transferred into the state account,” directed Mwafongwe in the letter dated 15 August 2016.
Mwafongwe said the move will enable it to recover tax owed by a business by taking a share of the money paid for work done.
“The Ministry of Finance has observed that most tenderers are usually in good standing with Inland Revenue Department at the time of bidding and thereafter fail to fulfil their tax obligations once the tender is awarded. In order to curb this behaviour and promote tax compliance, I hereby wish to issue this directive requesting your office to demand that any invoice issued to your office for payment be accompanied by a valid certificate of good standing issued by IRP stating payment purposes,” Mwafongwe said. The directive comes into immediate effect. He reiterated that Government should only conduct business with persons who are tax compliant in terms of submission of statutory tax returns and payment of taxes.
In accordance with the provisions of Section 83 of the Income Tax Act, Act 24 of 1981 and Section 31 of the Value Added Tax Act, Act 10 of 2000 Inland Revenue Department has the mandate of recovering the tax debt owing to the State.
Namibian taxation law, however, provides for punitive measures for failure to pay taxes that are due, because both the Income Tax Act No. 24 of 1981 and VAT Act, No. 10 of 2000 provide for the imposition of penalties and interests on outstanding taxes. Section 68 (1) of the VAT Act states that any person who fails to pay any tax payable under this Act on or before the due date for payment shall be liable to pay a penalty equal to 10 percent of the amount of unpaid tax for each month or part thereof reckoned from the first day after the due date to the date of payment of such unpaid amount.