VAT refunds under review

The Department of Inland Revenue says it is reviewing the VAT refund administration as the current system is saddled with problems that have seen some foreign visitors not receiving their VAT refunds.
According to Sam Shivute Commissioner of the Inland Revenue Department, the review will see an increase in the threshold for immediate VAT refunds to foreign visitors while the turnaround of the refunds above the threshold will also be improved in an effort to timely respond to claims, among other changes.
Shivute said the review is expected to be finalised before the end of the year.
Currently VAT refunds below N$5000 are paid out at the exit point, mainly at Hosea Kutako International Airport while refunds above N$5000 are submitted to the Department of Inland Revenue.
Shivute said the department has an average turnaround period of three weeks to deposit the money into the account of the VAT Refund Administrators [United Africa Group]. He said the VAT Refund Administrators are then responsible for the transfer of the money into the respective tourists’ account or issue cheques in this regard.
He said however, some countries do not accept the South African Rand as medium of exchange which has resulted in cheques in South African denomination being returned to Namibia.
Benita Herma CEO of Herle & Herma Jewellers told the Economist that the VAT refund to foreign visitors is a huge concern for businesses particularly those that rely on tourists and other foreign visitors.
Herma said: “The VAT refund to foreign visitors is a huge concern and has been for many years. Our manufacturing jewellery business receives around 60% of its turnover from tourists and other foreign visitors. Visitors carrying a foreign passport can request the VAT they paid on an item back at the airport. Even though there are some hiccups now and again, the system works fairly well.
“When it comes to amounts over N$5000 though, the money cannot be paid out at the airport. The foreign client then has to supply his bank account details, and the funds are – in theory – paid into his or her overseas account.”
“During the past 4 to 5 years, there have been dozens of complaints from our clients who come back to us with the information that they never received their money. Not after six months, not after two years. It simply never reaches them. We usually advise them to send copies of all their documents to the Ministry of Finance which they do – but I have never been told a success story afterwards.”
Herma said the problem is well-known within the tourism industry and has been mentioned to several representatives of relevant ministries during various tourism-related meetings over the years but nothing has been done to rectify the problem.
“Foreign visitors see the refunding of VAT as their right and they obviously feel cheated. It does not reflect favourably on the ministry or on the country, I am afraid,” Herma said.
She suggested that the refunding of VAT should be done at the point of sale as this will reduce the real cost of an item for travellers.
In the meantime, Shivute said his department has an open door policy for anyone with complaints regarding VAT refunds or any other tax related matters. He said: “We appreciate receiving complaints of such a nature as they will lead to service improvement within our department, increase the turnaround and ultimately enhance the image of the department.
“The Department of Inland Revenue appreciates the concerns raised and encourages all affected clients to approach our office with specific cases so that they can be dealt with timeously. We further request the general public to submit their letters to the office of the Commissioner and we pledge our commitment to respond and attend to all the correspondences issued.
“Please take note that the Inland Revenue Department is currently undergoing a comprehensive reform programme that is aimed at improving tax administration efficiency and excellent service delivery to our clients.”