….Low tax collection at Oshakati
Global data compendium CIA World Fact-book puts Namibia’s tax collection at 35.5% of GDP, higher than economic powerhouses such as Nigeria, China, Australia and Australia-ranking the country at position 60 out of 219 countries. Government recently admitted that the tax collection system is too lenient when it announced that it will write off close to N$15 billion owed by taxpayers. This comes at a time when the money is needed desperately to save the country from an economic meltdown.
Statistics provided by the finance ministry last week indicate that there are currently 665 458 taxpayers in the country, but it seems not everyone that ought to contribute to the country’s tax kitty is honoring their obligations.
The tax office in Oshakati is a good case in reference for unpaid taxes, despite many northern based businessmen amassing so much wealth over the years.
During the current financial year, the Oshakati tax office collected N$481 million in taxes, about N$50 million less than the Keetmanshoop office which only has 45 611 taxpayers.
The large taxpayers office and the Windhoek regional regional tax office are the biggest tax revenue contributors in the country having collected over N$27 billion during the current financial year- N$15.8 billion and N$11.4 billion respectively.
Over the years non-compliant taxpayers have gone unpunished and continue to enjoy state contracts despite being in the red with the taxman-the Oshakati taxpayers which caters for 91 048 taxpayers is of particular concern to Government.
Coupled with Namibia’s failure to equitably expand and maximize tax collections comes the inclination to behave like a welfare state, with multiple social safety nets.
Experts have warned Government in the past that the welfare state model is only effective when economic development has reached the entire populace, everyone contributes to the tax basket and the Government redistributes tax money efficiently through public spending. Unfortunately, Namibia ticks only a few of the above boxes.
This can possibly be singled out as the one structural issue that is holding back the Namibian economy and, unless addressed on a war footing, can keep the country meandering aimlessly to an uncertain future.
Facing the problem
Tax laws are not criminalized, making it difficult for the tax receiver to pursue non-compliant taxpayers, but finance minister Calle Schlettwein earlier this month said the introduction of performance management systems will ensure better administration.
And although he conceded that too many taxpayers are going scot-free even I they do not meet their tax obligations, urgent intervention is needed.
“There is a lot of slack in the system and people got away with murder[over the years] because of little action, but this needs to improve. If you have a tax revenue projections that are not met it will lead to cash flow problems. The problem we have is that tax laws are not criminalized, so unless a taxpayer engages into some fraudulent activities to avoid paying tax-little can be done,” he said.
Currently the principal tax amounts to N$4 billion but it goes as high N$19 billion when interest is added.
“To get N$19 billion will not be possible and it will be more detrimental to the economy. The interest rate charged eroded their[taxpayers] ability to pay, if we accommodate them by waving it to levels in line with the principle tax they will be able to pay,” said the minister.
Taxes include personal and corporate income taxes, value added taxes, excise taxes, and tariffs. Other revenues include social contributions – such as payments for social security and hospital insurance – grants, and net revenues from public enterprises.
Government agencies and state-owned enterprises themselves constitute a huge chunk of non-compliant taxpayers, one of the reasons that forced government to do away with a recent directive requiring businesses to be in good standing as taxpayers to receive any payment for goods or services delivered to the state “because it negatively affected the cash flow position, particularly for smaller businesses.”
Official figures indicate that the outstanding vat payments have now exceeded N$400 million, but Government was quick to point out that it is working around the clock to pay its dues. “We started to pay out but we are aware of that to avoid serious cashflow problems,” he vowed.
As the debate on how Government can maximize tax collection drags on, opinions from tax experts remain relatively unknown.
The Patriot spoke to experts on the matter and it seems many feel it’s time Government prioritises tax collection and punish those who fail to comply.
One of the tax experts is of the view that the biggest challenge facing Namibia’s revenue collection system is the computer system used by the Receiver.
“It is outdated and not capable of dealing with the volume of information that currently exists. It is not integrated between the different types of taxes that it manages and therefore getting exception reports from it for audit purposes is difficult and time consuming,” the expert said.
“They have started the process of developing a new computer program and the tender has been in effect for some time, but I am not sure when this process will be completed.
The accuracy of the information provided to the Receiver of Revenue by taxpayers is also a concern and I am not convinced that the tax forms completed are always done in full and by not fully completing the form it makes it difficult for the Receiver to manage these matters,” said the expert further.
The tax practitioner urged Government to avoid making tax collection too complicated.
“When things are getting tougher countries feel that they must pursue highly technical tax legislation options to increase tax revenue. I disagree. We should just make sure we are getting what we should from what we have.”
Speaking more on the matter, the expert said: “I am not convinced that everybody that should be in the system is in the system and paying their dues.
You cannot get people registered or complying with tax laws by sitting in government offices. You need to get people on the ground and into the economic centers of the country and inspect those that are not in the system. Issuing press releases and stating that people are not in the system is not going to work.”
Another expert who also chose to speak under the veil of secrecy said: “The accuracy of the processing of these forms are a concern. This results in a large amount of objections having too be submitted by taxpayers, which costs money and effort. It also results in a bottle neck of getting assessments finalized, especially for income tax, our experience.”
“Staff training and technical capabilities have to be increased in order to keep up with the economic realities of the world out there. The economic world changes very quickly these days and developments are constant and our tax systems and staff need to keep up with these changes.” Government has often been accused of not fully applying the legislation at its disposal.
“There are many sections and areas of taxation in our current legislation that are not applied on every taxpayer in the country and consistently applied between all offices of the Receiver. If we want to increase revenue collection, this is where we need to start. By applying the same rules to everybody and applying all the rules on everybody.”
An official who works for the tax receiver’s office also spoke to this publication on the matter but refused to be named due to the junior rank occupied.
“There are so many people in this country with skills and a lot of them will be willing to assist in this regard at a fraction of the price of international advisors that we so regularly employ. Use the skills in the country to get these matters addressed.
One should also realize that addressing these matters will not be a quick process. It will take time, but we will need to start somewhere and we will need to start very soon,” said the official, adding that when people see that Government are spending money on the really important things and not on corruption or matters that only benefit a few then people will be willing to pay tax.
Regarding talks that the establishment of a large taxpayers office led to a skills gap in the receiver of revenue office, the official said such talks are “a market perception, which maybe incorrect, but given how effective and efficient this new office is and how the other offices are mostly a struggle to get information from, the feeling is that the skills and knowledge have now been moved to this new office.”
“This[LTO] office is in principle a major improvement for Revenue and they should be commended for it.
The remaining taxpayers in the country could however ask the question as to why can they not get the same level of service.”
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