The CHALLENGES with VAT?
Part 2 in a series of 2
Based on an interview with the Institute of Commercial and Financial Accountants of Namibia
The first problem taxpayers experience starts right at the beginning of the required registration process. Why is this process so complicated? First a health certificate, now a fire brigade certificate, – a regular process has just been made difficult.
Yes, we hear, all these processes are to ensure the application is valid? In all fairness, if people transgress, use the might of the law to hit them, and not the innocent taxpayer. By getting registrations done quicker, more taxpayers will contribute to the fiscus. By making it so convoluted it becomes almost impossible to register. Both fiscal and commercial revenues are lost. It is sad that people want to do the right thing but the system obstructs the process.
When you apply for VAT registration, the form requests that you get a third party confirmation that a bank account exists, thus the bank stamps the form. If this data was captured by Inland Revenue they could have printed it on the form.
Taxpayers are unanimous in their criticism of the VAT registration ceiling. It is too low. N$200,000 after more than ten years is certainly too little. Maybe this is the reason why Inland Revenue is not coping.
Change of approach:
Our VAT system is invoice based, yet this fact is not appreciated in a VAT audit. Why?
More and more questions are asked to substantiate the payment of an expense. It is even unclear to the tax official that a cash payment is not shown on the bank statement.
Import VAT was always based on imports coming into the country, in one month. The VAT is payable on the 20th of the next month. Why change the interpretation from an accrual system – normal in income tax, – to a cash basis for the payment of import VAT? No logic.
The tragedy however is the fact that all taxpayers that were registered for import VAT have not been told about this change. Again the taxpayers have to shoulder the burden of penalties and interest.
Look at tax changes:
We agree, the VAT Tax Act is the domain of the Commissioner of Inland Revenue. But when it needs amendment, why not consult the professional accountants on whether the proposed changes will work. Their input and discussion can surely result in better legislation being drafted before it is promulgated.
Most accountants work hands-on with their clients. They talk to clients, get them on par, keep them on par, and make sure that their submissions are filed before deadlines. The two professional bodies for accountants are on record that they have offered to assist with legislation.
Taxpayers are facing numerous challenges when applying for VAT refunds. Again, apparently new rules to obtain a date for a VAT audit were introduced. You can only get a date if you bring a cancelled cheque. What would happen if you no longer have a cheque book?
Why is Inland Revenue making the process to getting a VAT audit so difficult? Surely the taxpayer must also have rights? Maybe the client does not like to have his cheques floating around. This data should have been captured in the Inland Revenue system.
Result – the audit is “luckily” postponed to a later date and the refund cannot take place. The taxpayer has more and more cash flow challenges and ultimately the economy suffers.
The taxpayer is also concerned if the original data is changed by Inland Revenue, due to a cheque that is presented. This is an opportunity for fraud.
Penalties & Interest:
Under current regulations penalties cannot exceed the tax amount, but interest at 20% amidst the current financial crisis, is becoming a heavy burden. The taxpayer’s view is that this is stealing, and if you charge it, then pay it to people that are waiting for their refund cheque. But this does not happen because Inland Revenue has not completed their audits. There should be a time frame in getting returns submitted cleared. Again a point for healthy debate.
Most taxpayers that are aware of their tax matters, ignore these SMS messages, but others try to respond. Mission impossible. You can phone as long as you like, and usually you are never able to contact any official on this telephone number. What is even more distressing is if you have no VAT number but get contacted, or the information on forms is wrong. As the taxpayer is invariably unable to resolve the matter, he phones his professional accountant, who is able, after a few minutes, to acknowledge that all forms have been submitted. A waste of time.
The only proof, that the taxpayer has is the stamped copy of all forms that he submitted. Poor taxpayer, he must waste scarce resources because Inland Revenue does not have its filing up to date. A disaster.
Certificate of Good Standing:
Here again, it is often the taxpayer that has to produce proof that his affairs are in order. Forms often do not exist in the offices of Inland Revenue. Then comes the question, why this process is so slow. One should confirm the data on the system and complete a certificate, thus only a matter of minutes, not days.
Payments to the magistrate:
Client in certain area’s are allowed to make payments at the magistrate’s office. Often clients then get statements indicating that their returns have not been received. Automatically penalties and interest are levied. Much later this is reversed in total, but if the client needs a certificate of good standing, this is refused.
Why does it take so long to clear such payments? Why is Inland Revenue unable to grant certificates of good standing knowing that the challenge is the system and not the taxpayer?
Should the taxpayer make a second payment, his refund is unnecessary delayed, often subject to a VAT audit. Again the taxpayer is penalised.
Most tender processes require a certificate of good standing. This is not a challenge for the taxpayer, as most keep record of what is required, thus a simple copy of the document normally settles the argument. However, what cannot be resolved is when Inland Revenue make a mistake on the taxpayers records. This normally cannot be resolved prior to closure of the tender date.
We all agree that mistakes happen, but to make the taxpayer responsible for that, is unacceptable.
If the mistake happens on an import into the country, the taxpayer on who’s account the entry has been posted, has no chance to rectify it, even if it is blatantly an error. This system needs urgent review. It is not acceptable that the taxpayer is responsible for a mistake by others while he is not in a position to change it. He is given no fair chance in the tender process. It certainly can influence the taxpayer’s survival.