11 July 2018

Namibia: Taxman Targets Informal Sector

THE Inland Revenue Department at the finance ministry has stepped up efforts to collect tax from the informal sector following a tax proposal made by minister Calle Schlettwein last year.

Schlettwein told an event at Walvis Bay in November that the government would introduce a presumptive tax on the informal sector as one of the measures to protect the tax base from erosion.

A pamphlet compiled by Inland Revenue titled Taxation of Business Income dated June 2018 identified five informal businesses that qualify as taxpayers.

These businesses are hair salons, taxi or bus operators, hawkers, plumbers and kapana vendors.

According to the pamphlet, those who operate from a salon in the city centre, informal markets or at home earn taxable income.

The pamphlet also says that hawkers who sell from door-to-door, in an open market, on the side of the road, under a tree, in the neighbourhood, or from the back of a car must pay tax.

"If you have people who call you to fix their broken taps and pipes for a fee - record such income and pay tax," the pamphlets say, referring to plumbers.

For kapana vendors, the pamphlet says: "If you roast meet (sic) and sell it, you are required to pay tax on such income."

Inland Revenue Commissioner Justus Mwafongwe told The Namibian yesterday that the pamphlet was meant to educate those in the informal sector on how to register as taxpayers.

He said they want those who are not compliant to register their businesses, and to prepare financial statements. Some people in the informal business sector might not understand what is expected of them, hence the call by the government to introduce the presumptive tax.

Mwafongwe added that to equalise the tax system, business owners who earn more than N$500 000 per year and individuals who get more than N$50 000 per year must pay tax.

Former NBC director general Bob Kandetu, who was buying at a stand at the Soweto Market yesterday, told The Namibian that if small businesses pay tax, it will kill their enterprises.

"They [small businesses] operate only on incentives such as non-taxation. The moment you start taxing them, either their business will decline, or you are teaching them how to survive below the tax line, and they will not grow," he reasoned.

A stand owner, Kamburee Kahengava, said he registered this year as a close corporation with his family.

Kahengava said they would submit their financial statement on 30 November this year. Based on that information, and if they had made a profit, they would be taxed at 32%.

Goddy Mujoro, who has worked at his Single Quarters stall for nearly 18 years, said paying taxes will leave them with nothing in the end.

"If I pay taxes, I will be left with nothing," he said, adding that he already has to pay the municipality N$450 for his stall, as well as pay electricity separately.

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