Sam Shivute is the new Commissioner for the Namibia Revenue Agency (NamRA). The agency has no empowering legislation and is not yet operational. Hiring a tax enforcer at a time of extreme financial distress in the Namibian economy is ill-advised.
Namibia is in serious financial trouble. Business and government must work hand-in-hand to save the economy. The government must not use a tax policeman to bash businesses on the head and then demand private sector participation in economic recovery.
And yet, Shivute when stating his commitment to building a credible and trusted tax collections institution said that the tax and excise laws are “non-negotiable.” He said that he would “hunt down tax dodgers.” This kind of confrontational language is understandable given Shivute’s police background. But, it reflects his lack of qualifications and experience in macroeconomics, tax collection and tax law.
Certainly, taxes owed must be paid. But, to prioritize tax collection over economic recovery, can exacerbate the decline of Namibia.
No government agency should increase economic strife that undercuts the country. Rather, a system of reaching out to industries with difficulties and negotiating a mutual solution can mean saving the jobs of a company’s employees.
We cannot act like the recession and drought and then the pandemic are not strangling the Namibian economy. These events are game-changers for businesses. Nothing can operate like before, not even tax collection.
Employee taxes must not be the only source of revenue collection. Tax collection from various areas needs to be more efficient such as the VAT. Emphasis on revenue collections in other areas of tax revenue could give a temporary respite to struggling businesses. It can help them catch up on arrears as the economy slowly re-opens.
Is now the time to hire a tax policeman with a whip? Or is the smart move to go to the distressed businesses and work out a solution that keeps jobs and production flowing? Does the new commissioner on the “hunt” for tax revenues, realize this?
Hundreds of thousands of Namibians have either lost their jobs or have reduced salaries or working hours. Employees with no money or reduced income cannot pay their bills or buy food; they cannot make purchases in stores.
In South Africa, SARS allowed businesses to regularise their tax affairs by making instalment repayment agreements. A successful submission allowed for a waiver of penalties and a plan to settle outstanding tax liabilities. This preserved jobs and helped businesses expand and/or revive.
The USA has the Internal Revenue Service (IRS) responsible for tax collection. The IRS had a ‘Fresh Start Program’ designed to give taxpayers with tax debt a second chance. This program included instalment agreements (IAs) for small businesses. It streamlined qualifications to make it easier to use.
The UK had tax amnesty programs as well. Her Majesty’s Revenue and Customs (HMRC) program had strict criteria for inclusion. For qualifying businesses, they looked at spreading tax payments where the taxpayer was unable to pay the liability in full. There were waivers for penalties and interest.
Germany also had a tax amnesty program that was applauded for encouraging citizens to declare income held abroad. Their program has brought in additional hundreds of millions of Euros.
Namibia also offered a tax amnesty program a few years ago. Government must consider a limited renewal of that program. Employers in distress due to recession and the downside of the pandemic restrictions should be offered relief.
Tax revenues are important to the national treasury. All governments aggressively pursue their due. A cost/benefit analysis of full tax amnesty, compromises on late payments or instalment payments (with no penalties) juxtaposed with forcing companies into bankruptcy, has to be considered.
A taxation grace period for business recovery after a war, natural disaster (like the pandemic) or severe economic depression is normal. Instead of employing a tax cop, Namibia should emphasize negotiation and reconciliation.
Businesses forced to close or reduce staff to pay tax debt without first considering negotiated settlements will drive the economy further into the grave. These actions would weaken the country more.
Commissioner Shivute must acknowledge this national reality and consider his “hunting” plans accordingly.