Presumptive tax on the cards
The government is investigating the possibility of introducing a presumptive tax for small businesses as a way of broadening the revenue base, the Minister of Finance has said.
Addressing Parliament on Wednesday during the tabling of the 2014/15 budget, Minister Saara Kuugongelwa-Amadhila said the government is investigating the introduction of a presumptive tax for SMEs as well as capital gains tax.
The minister also urged taxpayers with outstanding tax arrears to approach the revenue office and make arrangements to settle their liabilities before the Commissioner of Inland Revenue institutes statutory penalty measures.
She told the Economist upon inquiry that the format of the presumptive tax has not yet been decided upon, adding that her ministry was still reviewing the investigation report. Although she did not give further details, a presumptive tax has been commonly used in other developing countries to target selected sectors of the economy to ensure the participation of informal businesses in tax payment.
In countries where a presumptive tax apply, it has been used to tax businesses such as small scale miners, cross boarder traders, operators of restaurants and shebeens, driving schools, taxi businesses, accommodation establishments, and small businesses that traditionally are not compliant with tax laws.
In recent years the government has been carrying out tax policy and administration reforms which have helped lower the tax burden on individuals and corporations, broadened the revenue base, enhance dcompliance and grown national revenue.
Last week, the Inland Revenue Department warned tax evaders that they risk being banned from participating in public tenders after initial investigations revealed that a number of businesses participating in the public tender system are not paying their fair share of taxes by under-declaring their income from state tenders.
Inland Revenue Department Commissioner Sam Shivute told the Economist recently that preliminary investigations have unearthed irregularities. He said although investigations are still on going, it is feared that the state might have been prejudiced of large sums of money in taxes. Shivute said a number of delinquent taxpayers have already been handed over to the courts for legal action warning culprits that they risk paying additional taxes as stipulated by the law.
“I would like to call upon taxpayers to correctly declare their income and pay their fair share of taxes due to the State. Tax Payers who omit to declare their income must note that such conduct is criminal and punishable by the law as provided for under Section 65 (1),” Shivute said. “In addition, taxpayers who default or omit to declare their correct income will be liable for additional tax. Section 66 (1) (a) of the Income Tax Act, No. 24 of 1981 as amended provides that: “A taxpayer shall be required to pay in addition to the tax chargeable in respect of his taxable income – if he omits from his return any amount which ought to have been included therein, an amount equal to twice the difference between the tax as calculated in respect of the taxable income returned by him and the tax properly chargeable in respect of his taxable income as determined after including the amount omitted.” The Commissioner said his department will not hesitate to strictly apply the law, adding that efforts to determine exactly how much money the state has been prejudiced through underdeclaring of income on government tenders, will continue.