Shivute Speaks About Being a ‘Taxman’ [interview]

The Namibian (TN) spoke to outgoing Commissioner of Inland Revenue Sam Shivute (SS), who was seconded by the Bank of Namibia to transform the Inland Revenue department.

After 18 months at the helm Shivute is finally going back to his job at Bank of Namibia.

Can you shed light on the projects and reforms you implemented?

First, I would like to thank the Bank of Namibia and the Ministry of Finance for giving me an opportunity to serve my country as Commissioner: Inland Revenue Department. I also wish to thank colleagues at the revenue department for unwavering support and cooperation during the past 18 months. Furthermore, I would like to say from the onset that whatever was achieved or implemented was a result of collective efforts.

We established a Project Management Office to coordinate reform projects. Business Process Re-engineering project was completed within budget and in accordance with technical specifications. It entails fundamental rethinking, and radical redesigning of all business processes to eliminate bottlenecks and improve efficiency.

The Integrated Tax Administration System project will be completed by 2016. The Backlog Elimination Strategy was implemented and 85% cleared by the end of September 2014. We established a Debt Recovery Committee that aggressively recovers tax.

The Taxpayers Communication Strategy was also implemented to give the IRD a presence on social media and all major trade fairs and expos. We suspended about 3 000 VAT Import Accounts whose holders had not fulfilled their tax obligations. The finance permanent secretary has signed agreements with the NedBank and Bank Windhoek for the acquisition of speed points at all our offices, magistrate offices and all major border posts.

We established Tax Intelligence amp Investigation Units to deal with tax evasion, tax fraud and corrupt practices within the Inland Revenue Department.

More than 200 staffers who never had any basic taxation training were trained. Some of them have been in the system for 10 years or more. When I left, at least every staff member, including those in temporary positions, had been trained.

For the first time, we had four people – with the help of the World Bank and African Tax Administration Forum – attend some of the best international universities in Germany and Japan, to train in tax policy matters at a postgraduate level.

Are the special mining unit and large taxpayers’ office some of the newly created departments?

The Large Taxpayers’ Office was launched by the finance minister on 30 June 2014. It’s been operational since 13 July 2014 under the Large Taxpayers’ and Investigation Directorate. Another division is Forensic Audit. A mining unit and a transfer pricing unit will be created within the Large Taxpayers Office. In September 2013, we established the Tax Intelligence amp Investigations Coordination. The results achieved by this unit are phenomenal and unprecedented.

What are the challenges in collecting tax in the country?

Instead of focusing on challenges, we candidly focused on a multitude of opportunities. The Namibia Tax Law presents massive opportunities. The law is very clear. We need bold, decisive leadership and effective implementation of tax laws in accordance with the international tax principles.

Is tax evasion a myth or a reality in Namibia? How serious is it?

As a patriotic Namibian who put his life on the line for the country whilst serving in the police and the United Nations, I shall never shy away from speaking the truth. Tax evasion in Namibia is not a myth. We have gathered overwhelming evidence and concrete information to support this. The good news is that we are doing something to arrest the situation.

The results and the impact of fighting tax evasion might not be felt this year or next year. It will definitely be realised in a few years to come. I have requested my colleagues to continue fighting and they promised me that tax laws enforcement will be taken to another level.

An example is when we did a small audit check to determine whether those getting public tenders pay taxes. We discovered that more than 1 500 businesses are either under declaring or not declaring their income. You have those who declare losses and those who submit zero returns. IRD is working hard to address this.

Who are the main culprits?

Individuals, professionals, big corporations and some multinationals. I can confidently submit that tax evasion in Namibia is real. It is bad for our country and the economy. I must also acknowledge and submit that there are many good citizens, corporates and individuals who are tax compliant.

Within the corporations, which sectors are the culprits in dodging tax?

SS: I don’t want to specify because I might leave out some. There are businesses not paying some charge VAT while not registered as vendors and not remitting to the State businesses trading while submitting nil returns some corporations falsely claiming VAT refunds individuals and businesspeople not declaring their incomes including rentals and directors’ fees and fewer imported retail products declared.

Those are some of the schemes we are currently dealing with. We have picked up more than 25 various schemes that commit tax fraud and evasion. We have registered more than 79 criminal cases with law enforcement agencies. As we warned in February 2014, those who are making themselves guilty of these criminal offences must stop it and note that the necessary action is being taken and that the law will catch up with them one of the good days.

Explain the concept of transfer pricing and how it affects the country?

Transfer pricing is the pricing of goods and services in transactions done by interconnected groups of companies (Jooste 2010:36). The UN Manual on Transfer Pricing defines it as a general term used for the pricing of cross-border related transactions between firms belonging to the same group.

Transactions between related entities can be abused such that multinational corporations shift profits and costs internally and across the borders from one jurisdiction to another. Costs and profits can be shifted in a manipulative manner to ensure that they minimise global tax liabilities.

Developed and developing countries lose billions in US dollars annually through the practice. The 2013 Global Financial Integrity, Illicit Financial Flows from the Developing World: 2002-2011 report says US$5,9 trillion was lost from 2002-2011 – increasing at an average annual rate of more than 10%.

Of this amount, developing countries lost about US$700 billion by multinationals’ transfer pricing. Namibia introduced section 95A in the Income Tax Act, No. 24 of 1981 as amended. I am happy to report that we developed basic capacity in the area of transfer pricing by exposing our staff to high level training at Duke University in the USA and at the Malaysian Tax Academy. It has now been resolved that a Transfer Pricing Unit will be set up during this month within the Large Taxpayers Office. Finally, we are ready to implement the Transfer Pricing law that was passed in 2005.

The other measures expected includes the export levy bill on minerals, fish, game – has this been done?

The draft is complete at ministerial level. The Bill was submitted to the legal drafters who made some comments that are being considered by the technical department.

We understand the revenue authority saw a significant increase in revenue collection during your stay. Is this true?

SS: Namibia experienced an impressive revenue collection during the 20132014 financial year. This is acknowledged by some economists, the central bank, IMF and the African Development Bank’s report on Namibia’s Economic outlook. This did not just happen due to better economic performance but deliberate leadership strategies and boldness in tax debt recovery. You can get the figures from Treasury because it is public information. The increased revenue collection is continuing and by end of September 2014 , we had already collected 50% of the estimated revenue budget.

You became unpopular, especially with the business community, for your tax collection methods. Please comment.

I was not aware of that fact. However, when I took up this responsibility, I was aware that I was not entering a popularity contest. My commitment was to serve my country to the best of my ability. I strove by all means to operate within the laws and implement them fairly and objectively. All collection methods were carried out according to the laws.

We understand the authority is going after some individuals and businesspeople and Ministry of Finance employees who colluded with them?

On 12 February 2014, we publicly announced that findings from our preliminary tax compliance audit indicated that a number of companies awarded tenders had either under declared or failed to declare their incomes as required by law. A warning was issued that legal action will be taken.

In cases where criminal activities (forged certificates of goods standing, false declarations, false VAT refund claims, tax fraud, etc.) were committed, we duly registered criminal cases and investigations are ongoing. The law will take its course, it is just a matter of time. So far about 10 suspects have been arrested and charged. Four were arrested during my last week in the office and a good number will be dealt with in due course. At this juncture, I would like to commend the police for seconding detectives to the IRD to deal with tax evasion and tax fraud.

How far are plans to increase the VAT threshold?

The drafting part is done and the Bill will be submitted to the Cabinet Committee on Treasury in due course.

Are the Export Levy Bill, the VAT Bill and Transfer Duty Bills still being drafted?

The drafting part is done in due course the Bills will be finalised and implemented.

When will the Revenue Authority likely start operating like SARS in South Africa?

The current plan is to have the Revenue Agency established by 2016.

Is there political will to improve the country’s tax regime?

SS: The current comprehensive tax reforms in Namibia is a result of a Cabinet decision. In my view, that Cabinet decision and the Minister of Finance’s various public calls to taxpayers to be compliant is a good sign that there is political will. I must also state that I have received the necessary support and resources to carry out the projects and programmes under the tax reform agenda.

In conclusion, I would like to inform all Namibians and businesses that it is important to be tax compliant. You cannot run away from taxation problems. You need to face and solve them. We need to remember that the peace and stability we are enjoying do not come on a silver platter. The State needs revenue from its domestic resources to maintain peace, stability and create a conducive business environment. We can only speak about being truly independent if we fund our socio-economic and developmental needs. Being tax compliant is good for Namibia and for future generations. Together with my colleagues at the Inland Revenue Department, we have served Namibia with passion. My colleagues will continue serving Namibia with passion.

Source : The Namibian