GOVERNMENT’S decision to backtrack on a tight tax regulation reform and revert back to a system where individuals and corporates owing the public purse can do business with the State needs to be cautiously approached as it has the temerity to open doors to perpetuate tax evasion by tender moguls and entrepreneurs who for many years have ignored the State’s clarion call for good standing with the Department of Inland Revenue.
Although this change of heart by responsible authorities has widely been deemed to make economic sense and foster better trading relationships between Government and the private sector, the exploration of tax evasion and avoidance is of paramount importance to economic development.
One of the greatest problems facing the Namibia tax system is the problem of tax evasion and tax avoidance and it should be noted that a country facing an increasing amount of tax evasion and tax avoidance is likely to exhibit a low productive investment mix which would mean low economic growth and that public run enterprises would be negatively affected.
It is interesting that most influential businesspeople suddenly had been all-too-eager to label the Ministry of Finance as one that is stifling development with its Inland Revenue department having introduced measures to wheedle out any loopholes and shame offending parties.
Many were caught on the wrong side of the law and should have faced tax evasion prosecution yet all they got was relaxed reforms that allow them to make payment plans as Government also seeks to recover lost financial gains.
Empirical evidence has shown that the uncooperative and unprogressive attitude of our citizenry towards tax payment results in major financial problems for Government. Obviously it is an agreed fact that payment of taxes is among the basic things needed for the survival of any society and more so for Namibia which is at a major transitory stage in her quest for industrialisation and provision of amenities for her citizens.
With very little doubt, tax evasion is central to fundamental issues in public economics. Its most obvious impact is to reduce tax collections, thereby affecting the taxes that compliant taxpayers face and the public services that citizens receive.
Beyond the revenue losses, evasion leads to resource misallocation when people alter their behaviour to cheat on their taxes, such as their choice of hours to work, occupations to enter, and investments to undertake.
This is why after this reform U-turn, Government has to expend resources to detect, measure, and penalise non-compliance and this is because non-compliance alters the distribution of income in arbitrary, unpredictable, and unfair ways.
Confidente. Lifting the Lid. Copyright © 2015