WINDHOEK – There is no new tax regime targeted at the informal sector nor is the government intent on introducing such a regime in the near future, Finance Minister Calle Schlettwein confirmed yesterday.
However, government is tightening screws on tax evaders, as it did with ‘Operation Sunrise’, which specifically went out in the field to identify non-compliant entities and individuals, and visited 381 foreign-owned small and medium businesses ranging from second-hand car dealerships, and shops selling cellphones, watches and clothing.
Operation Sunrise managed to register 217 new taxpayers and raise tax assessments valued at N$50 million from these businesses, Schlettwein said.
Also, lifestyle audits and auditing of multinational companies and businesses are being conducted.
“These initiatives are being undertaken for all registered and non-registered persons irrespective of their nationality and background,” the no-nonsense minister said.
“What we intend doing is to seek for increased compliance and escalate enforcement of the provisions of the existing tax laws,” said Schlettwein.
Treasury’s response came after weeks of heated public debates that government is planning to tax the informal sector, and by so doing harm the livelihood of so many people who depend on the sector for a living and not rich enough to pay taxes.
Schlettwein, who held a press conference yesterday with senior Treasury personnel, made it clear that the raging debate, postulating what is supposedly a new tax targeting the informal sector, is a misconstrued generalisation of well-intended information from tax education pamphlets on ‘Taxation of Business Income’ that the ministry authored.
He said the information-sharing was done at the request of the informal sector, which wanted to have information on the country’s tax laws.
However, it appears that the information contained in these pamphlets was misunderstood and taken out of context, and this led to miscommunication within the public, the minister said.
What government is essentially saying in these information pamphlets is that, according to the law on income tax, any person and any company that earned income during every tax year must pay income tax.
“This provision does not discriminate between formal and non-formal businesses. Neither does it discriminate between Namibian-owned or foreign-owned business,” he said.
Such efforts have yielded positive results, with additional revenue and more taxpayers being brought into the tax net.
According to the law, any person earning N$50,000 per year must be registered and pay income tax. The law also allows for various deductions against taxable income before tax liability is calculated.
“It is inconceivable and a flagrant violation of tax laws to expect a tax system, which is far and equitable to exempt certain individuals earning the same income as others who are taxed on the bases of an industry or sector of the economy in which they operate. The fundamental basis of taxation is levels of income and the tax law defines those levels of taxable income,” he said.
“Income is generated from various sources and their categorisation as formal or informal is not material for tax purposes. The informal businesses mentioned in our pamphlets are cited as a way of illustration, but not limited to those listed. The idea is rather to draw the public’s attention to the fact that any person or company generating revenue from any trade, which is above the required threshold is subject to income tax and should be registered and comply with tax laws,” said Schlettwein.
“We urge all taxable income earners to embrace corporate citizenship and muster tax morality to comply with tax laws. We should effectively address the free-rider problem whereby persons who should pay tax evade and avoid to pay tax but proceed to make use of public services such as roads, schools and hospitals paid for by other persons earning the same income as themselves,” said the finance minister.