Namibia: Low Tax Compliance Leads to Nam's Spiking Debt

NAMIBIA'S ever-increasing debts are partly the result of citizens and businesses not paying their fair share of taxes.

If they did, the budget deficit would decrease, which would lead to a significant reduction in national debt, which is expected to reach N$130 billion by the end of this fiscal year, analysts say.

They were responding to a shocking percentage revealed by Sam Shivute, the commissioner of the Namibia Revenue Authority (Namra), at the agency's launch on Wednesday.

Shivute said tax compliance in the country was woefully low and needs to improve.

"Tax compliance in Namibia stands at 57%, which is very low. Even within the 57%, not everyone is declaring what they are supposed to pay," Shivute said.

The former police detective said the days of those who are used to not paying tax are numbered.

"We will not hesitate to use our full enforcement powers to target those who try to cheat the system. They cheat not only the system, but each and every honest Namibian who pays what they owe," he said.

Shivute said this approach would also be extended to dealings in the cash economy - mainly to taxi drivers, salons, Chinatown establishments and corner shops earning above the tax threshold.

While some factions see the new revenue agency as a rebranding exercise, Shivute said integrity, diversity, efficiency, fairness and agility would be the agency's values, and every agency employee is expected to live up to this.

Local economist Salomo Hei said all hopes are pinned on the agency to fulfil its mandate.

"Where revenue agencies are stand alone they tend to improve collections, and we hope Namra can do the same," he said.

Another analyst who commented anonymously said the low tax compliance as stated by Shivute poses a risk to government revenue, lowering its ability to execute developmental projects that will drive economic growth, equality and poverty eradication efficiently.

The analyst, however, hinted at other areas also contributing to high state debt.

"Excessive increase in government spending, high corruption, ghost employees and the mismanagement of available funds are the core drivers of the rapid increase in government debt," the analyst said.

If implemented successfully, efficient and increased revenue collections could help increase budgetary allocations to the developmental budget, which would hopefully translate to the productive and efficient implementation of these developmental goals.

"It's important to note that the nation should strive to align expenditure to revenue and make efficient use of the revenue collected," the analyst said.

Eloise du Plessis, PSG Namibia's head of research, said the size of the taxbase in Namibia is problematic already, so when compliance is low this exacerbates the situation.

"One would hope that Namra makes this easier and that more tax is collected, but in my opinion it is more important to make it easier to operate for small businesses to create good jobs. This will broaden the tax base. Trying to tap more blood from a stone is not sustainable. We already have one of the highest tax-to-GDP ratios in the world," she said.

Taxes would be collected without fear or favour, but the wish is also that taxpayers would contribute voluntarily, Shivute said.

"We know we must improve voluntary compliance. We need to make it easier for taxpayers to comply by tailoring programmes to their real needs. To this end we will develop a taxpayer charter. We must be consistent and fair in our application of the law," he said.

"Our aim is to collect the fair amount of tax and duties owed to the state and no more," Shivute said.

The agency was launched by president Hage Geingob, who said its establishment is central to the agenda of mobilising domestic resources.

"The reform will sharpen our institutional capacity and responsiveness to the complexities of an increasingly integrated regional and global economy. This capacity is best manifested not only in the ability to collect the right amount of tax fairly and at the right time, but also to enhance the efficiency of the overall tax system in relation to its objectives, and to strike a fine balance between taxation and socio-economic development objectives," the president said.

The event also saw minister of finance Iipumbu Shiimi granting Shivute tax and customs administration powers.

First initiated in 2012 during former president Hifikepunye Pohamba's tenure, the agency will be responsible for revenue collection, the administration of tax, customs and excise laws, as well as the efficient provision of services to taxpayers.

The launch follows a declaration in the Government Gazette 7496, of 1 April 2021 that the agency is in operation as of 6 April 2021.

Namra will operate from the finance ministry's headquarters and will use state vehicles until all its systems are fully functional.

More than 1 200 staff members from the Inland Revenue Department and the Customs and Excise Directorate have been transferred to Namra.

Email: [email protected] | Twitter: @Lasarus_A

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