NamRA to investigate VAT refund scam
Expected to be in BILLIONS
The Namibia Revenue Agency (NamRA) is working on methods to close loopholes to optimize revenue collection.
The Namibia Revenue Agency (NamRA) will investigate a Value Added Tax (VAT) refund scam, which is expected to be in billions of Namibian dollars.
For income tax, the biggest contributor to revenue, NamRa has taken note of individuals from more than 41 institutions, who for a period of about seven years, on an annual basis, got refunded between N$100 000 to N$300 000 that they are not entitled to.
The investigations thus far found that the income tax refund tax scam amounted to over N$70 million.
Between January 2022 to October 2022, NamRa refunded a total N$4.5 billion, of which only 5% is for income tax and the remaining 95% is for VAT.
NamRA’s Commissioner Sam Shivute made these remarks in his keynote address at the Mid-Year Budget Review Breakfast hosted by PWC, Standard Bank Liberty Life and Namibia Media Holdings(NMH).
Between the 1 April 2022 to 31 October 2022, total net revenue collected stood at N$35 billion. Revenue collected from individual tax payers amounted to N$9.2 billion, (27%), company income tax N$4.3 billion (12%), VAT N$8.2 billion (23%), international tax N$11.7 billion (33%) and other taxes N$1.6.
Shivute has cautioned companies, including successful ones in the fishing, mining and retail sectors that are under-declaring their earnings in order to avoid paying taxes.
The Agency is working on methods to close loopholes to optimize revenue collection. The tax compliance rate is 57%. Within the 57%, not all of them are fully compliant.
Risks
Finance minister Ipumbu Shiimi recently announced a projected increase in the revenue for the current financial year by N$4.4 billion.
In a panel discussion, Standard Bank economist Solomon Kint noted that Namibia remains a small open economy that is vulnerable to shocks. Domestic and external shocks place a risk in achieving the targets set out.
The existence of NamRa has made a difference in terms of revenue collection and will mitigate some of those risks, he said.
“From a revenue perspective, we are still heavily reliant on traditional sources of revenue and over time there has been efforts but not enough in diversifying our portfolios of revenue in terms of government finances.”
Looking at interest rates, the repo rate has increased by 250 basis points thus far in 2022. The rate at which commercial banks borrow the central current stands at 6.25%, while the prime lending rate stands at 10%. Inflation stood at 7.1% in September.
According to Liberty Life managing director Monique Cloete, private sector credit extension remains fairly flat. Vehicle sales is down year-on-year quite significantly, particularly in passenger and light commercial vehicles.
For insurance, she has observed that life and disability cover is not tangible to most people. It seems to be the first thing people give up on.
“We have become a nation who are about now and not the future necessarily. We have become people who are not necessarily savers.”
For retirement, about 90% of benefit payments in Namibia are for people moving between different employers and they are cashing the benefits. On an annual basis, only 7% of benefit payments on average are for people who reach the retirement age.
Lastly, Johan Nel, Corporate Tax Partner at PWC said the investigation to increase raise the tax threshold from N$50 000 to N$100 000 will have a positive impact the lower income groups as they will have more disposal income to invest in the economy.
In South Africa, the threshold for not paying taxes as an individual is around R90 000.
Nel further pointed out that the potential reduction in taxes from non-mining companies is a positive development, however, it will reduce revenue collection a [email protected]
For income tax, the biggest contributor to revenue, NamRa has taken note of individuals from more than 41 institutions, who for a period of about seven years, on an annual basis, got refunded between N$100 000 to N$300 000 that they are not entitled to.
The investigations thus far found that the income tax refund tax scam amounted to over N$70 million.
Between January 2022 to October 2022, NamRa refunded a total N$4.5 billion, of which only 5% is for income tax and the remaining 95% is for VAT.
NamRA’s Commissioner Sam Shivute made these remarks in his keynote address at the Mid-Year Budget Review Breakfast hosted by PWC, Standard Bank Liberty Life and Namibia Media Holdings(NMH).
Between the 1 April 2022 to 31 October 2022, total net revenue collected stood at N$35 billion. Revenue collected from individual tax payers amounted to N$9.2 billion, (27%), company income tax N$4.3 billion (12%), VAT N$8.2 billion (23%), international tax N$11.7 billion (33%) and other taxes N$1.6.
Shivute has cautioned companies, including successful ones in the fishing, mining and retail sectors that are under-declaring their earnings in order to avoid paying taxes.
The Agency is working on methods to close loopholes to optimize revenue collection. The tax compliance rate is 57%. Within the 57%, not all of them are fully compliant.
Risks
Finance minister Ipumbu Shiimi recently announced a projected increase in the revenue for the current financial year by N$4.4 billion.
In a panel discussion, Standard Bank economist Solomon Kint noted that Namibia remains a small open economy that is vulnerable to shocks. Domestic and external shocks place a risk in achieving the targets set out.
The existence of NamRa has made a difference in terms of revenue collection and will mitigate some of those risks, he said.
“From a revenue perspective, we are still heavily reliant on traditional sources of revenue and over time there has been efforts but not enough in diversifying our portfolios of revenue in terms of government finances.”
Looking at interest rates, the repo rate has increased by 250 basis points thus far in 2022. The rate at which commercial banks borrow the central current stands at 6.25%, while the prime lending rate stands at 10%. Inflation stood at 7.1% in September.
According to Liberty Life managing director Monique Cloete, private sector credit extension remains fairly flat. Vehicle sales is down year-on-year quite significantly, particularly in passenger and light commercial vehicles.
For insurance, she has observed that life and disability cover is not tangible to most people. It seems to be the first thing people give up on.
“We have become a nation who are about now and not the future necessarily. We have become people who are not necessarily savers.”
For retirement, about 90% of benefit payments in Namibia are for people moving between different employers and they are cashing the benefits. On an annual basis, only 7% of benefit payments on average are for people who reach the retirement age.
Lastly, Johan Nel, Corporate Tax Partner at PWC said the investigation to increase raise the tax threshold from N$50 000 to N$100 000 will have a positive impact the lower income groups as they will have more disposal income to invest in the economy.
In South Africa, the threshold for not paying taxes as an individual is around R90 000.
Nel further pointed out that the potential reduction in taxes from non-mining companies is a positive development, however, it will reduce revenue collection a [email protected]
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