Windhoek-Finance Minister Calle Schlettwein is distressed about the practice of deliberate tax evasion among various businesses, a situation that has become endemic, and Schlettwein belaboured the fact that this practice erodes optimal tax collection. He exhorted all companies and businesses to comply with their tax obligations or face the prospect of prosecution for tax dodging, which is punishable by law.
“The arrangement of one’s financial affairs in a manner to minimize tax liabilities within the law is one thing, but the illegal non-payment or under-payment of taxes is quite a different matter. Be that as it may, tax administrations in general treat both practices as unwanted as they erode optimal tax collections.”
He made the comments on Monday in Windhoek at the Chinese embassy where Chinese Ambassador to Namibia, Zhang Yiming, had arranged an interactive tax lecture with Chinese business people to sensitise them on complying with Namibian tax laws.
“For instance, we have evidence that some businesses operate on a cash basis and that is done with the deliberate aim not to pay tax. This occurs to such an extent that such businesses do not maintain proper bookkeeping and some do not render sales receipts to their clients. This would be tantamount to tax evasion,” Sclettwein elaborated.
“We also have evidence that some businesses are in partnership with Namibians and that through such partnerships tax obligations are seriously neglected, sometimes even fraudulently so,” the finance minister said at the tax lecture.
Schlettwein also made reference to some multinational companies misusing their international operations to avoid paying tax in some African tax jurisdictions such as Namibia, and ship their profits into tax havens. He said this is done through transfer pricing, profit shifting, thin capitalization and several other tax avoidance schemes.
He gave the example of the recent news reports that were based on the leaked “Paradise Papers” and “Panama Papers” and Namibia’s own lawsuits against customs fraud.
“We are not living in a perfect world. I am equally aware of weaknesses in our tax administration and possible wrongdoing – suspected corruption by our own officials. The appeal to you, our partners, is not to cooperate with those who solicit bribes, but to report them. This is important for your integrity, your own interest and for our mutual benefit.”
He stressed that the Namibian Tax System, predominantly regulated by the Income Tax Act (personal and corporate tax) and the Value Added Tax Act (consumption tax), obliges all non-residents employed in Namibia, or a foreign company trading within Namibia, to pay taxes on income earned within Namibia as well as VAT.
Individuals pay tax of between 18 percent and 37 percent, registered manufacturers pay tax of 18 percent, non-manufacturing corporates pay tax of 32 percent while mining companies pay tax of 37,5 percent and the tax rate for diamond mining stands at 55 percent.
Tax returns must be filed on time and tax payments must be made on due dates, failure of which will result in penalties of up to 100 percent of tax amount and interest charged at 20 percent per annum, in addition to the tax, he said.
On his part, Ambassador Zhang said the lecture was intended to promote the understanding of Namibian tax policies by Chinese business people and companies and to enhance their awareness and compliance with paying Namibian taxes.
He said Namibia is China’s “all-weather” friend and this relationship is a priority for the government of the People’s Republic of China – and as such he would like to make the relationship between his country and Namibia a model among relations between China and southern African countries.
“Since the establishment of diplomatic ties 27 years ago, our economic and trade cooperation has been expanding fat. There are now 60 Chinese enterprises and nearly 7,000 self-employed businessmen in Namibia, covering a lot of fields,” he said, adding that these enterprises have made a positive impact on the lives of ordinary Namibians.
Zhang entreated the Namibian government to safeguard the rights and interests of Chinese businesses while problems that arise should be resolved constructively.
He said individual cases of wrongdoing should not be exaggerated or politicised.