17 July 2018

Namibia: Tax System Should Be Fair to All - Schlettwein

FINANCE minister Calle Schlettwein yesterday said exempting some individuals from paying tax was a violation of the law when they earned the same income as other taxpayers.

His comments were made during a press conference in Windhoek in response to media reports last week about the government seeking to tax the informal business sector.

The media reports emanated from a widely circulated pamphlet with a list of informal businesses which should register to pay tax.

Schlettwein said the ministry had not introduced a new tax regime for the informal sector, nor was there any intention to introduce such a tax regime in the future.

"What we intend doing is to seek increased compliance, and escalate the enforcement of the provisions of the existing tax laws. The current Income Tax Act subjects any person and any company that earned income during every tax year to pay income tax.

This provision does not discriminate between formal and non-formal businesses, neither does it discriminate between Namibian-owned or foreign-owned businesses," he stated.

Schlettwein further noted that income is generated from various sources, and their categorisation as formal or informal is not material for tax purposes.

He added that any person or company generating revenue from any trade that is above the required threshold is subject to paying income tax, and should be registered and comply with tax laws.

"In the bid to achieve greater equity and fairness in the administration of the tax system, we embarked on different initiatives such as lifestyle audits, auditing of multinational companies, including mining and fishing companies, aimed at ensuring the tax compliance of all individuals, businesses, companies, close corporations, partnerships and other entities," the minister said.

His ministry carries out countrywide quarterly field compliance visits codenamed Operation Sunrise that target non-compliant entities and individuals.

So far, he said, officials have visited 381 foreign-owned small and medium businesses trading in second-hand car dealerships, cellphones, watches, clothing and accessories.

"As a result, 217 new taxpayers were registered, and assessments to the value of N$50 million were raised," Schlettwein said.

Abdallah Ali-Nakyea, the managing partner at Ali-Nakyea & Associates, said the government needs to embark on extensive tax education in the informal sector so that taxpayers understand and appreciate the need to honour their tax obligations for national development.

Ali-Nakyea added that the government should engage the informal sector to secure voluntary tax compliance rather than using force because that may make them go into the underground economy, and they may never be reachable.

The government should furthermore show the informal sector how the money they pay as tax is used to help them realise that they are partners in development, and are not being exploited.

Although taxation of the informal sector is a challenge globally, Ali-Nakyea said it does not mean they should be left out of the tax bracket.

The Namibian Employers Federation's secretary general, Tim Parkhouse, said it was a question of viability where the informal sector is concerned.

"If their net earnings are above the taxation threshold, they should pay. After all, does it make any difference if they are informal or formal?

"The question whether it is viable or not is a massive question. Do they keep accounting records that can prove what they earn, and that expenses are allowable and relative?" he asked rhetorically.

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