Tax administration reform in Namibia
President Hage Geingob says that the administering of tax laws and collection of state revenue demand high standards of integrity and customer-centric service delivery, which should permeate in the dayto-day operations of Namibia Revenue Agency (NamRA). He further stated, “The public expects NamRA to be an exemplary institution that will foster a fine balance between economic growth and trade functions as well as providing tax services to all taxpayers.”
Madhuri asserted that, “Tax reform is a policy implementation by the government through which few alterations are made into the tax system in order to overcome the loopholes and enhance the effectiveness of the tax administration in the country in order to generate higher revenues from taxes as compared to the overall spending”. Taxes can be used by the governments to provide public goods and other public services such as infrastructure, education, healthcare, social security, and all these are important for the growth of the economy. Some people think that if people don’t pay taxes, and this money can be invested, there would be a higher growth. That is not correct. Growth can be affected negatively due to the inadequate investments in public goods and other public services. Tax reform can reduce tax evasion and avoidance, and allow for more efficient and fair tax collection that can finance public goods and services. It can make revenue levels more sustainable, and promote future independence from foreign aid and natural resource revenues. Another indication of revenue performance can be seen from NamRA’s tax effort. Tax effort basically refers to the ratio between the real tax collection and its tax capacity, which is the maximum tax revenue that can be collected. NamRa employed people with wealth of experience according to website. This means that revenue is collected at maximum capacity and the agency suggests that more emphasis should be put on revenue enhancement through policy and administration reforms.
Widespread tax resistance is observed. People may take to the extreme to evade taxes, for instance, by literally hiding in the bush when tax collectors are approaching. Taxpayers have a feeling that every tax is a burden. This psychological state of mind of the taxpayers has a disincentive effect on the willingness to work. They feel that it is not worth taking extra responsibility or putting in more hours because so much of their extra income would be taken away by the government in the form of taxes. But a regressive tax system increases the inequality of income. Further, taxes imposed heavily on luxuries and nonessential goods tend to have a favourable impact on income distribution. But taxes imposed on necessary articles may have regressive effect on income distribution.
Administrative reforms are increasingly stressed as key elements of tax reforms. This is reflected in the establishment of semi-autonomous revenue authorities in a number of countries. Inspired by new public management paradigms, effectiveness and efficiency concerns are typical reasons for establishing an autonomous revenue authority. In redesigning the tax structure, the following options should be considered such as abolition of unsatisfactory taxes; and improvements to remaining revenue bases. Further simplifications of the tax system may also provide a positive contribution towards reducing revenue losses through corruption and tax evasion.
There is also an urgent need to improve co-ordination between the various levels of government with respect to tax policies. At the same time, improved tax structure will not work properly unless it can be properly administered. Thus, reforming the tax structure is only the first step, albeit a necessary one. Lack of a taxpaying culture is the largest obstacle to building a long-term revenue base. The opposite may, however, also be the case as long as the tax administration culture is perceived to be influenced by sectarianism, nepotism and corruption, it is unlikely to contribute to the fostering of a more conducive taxpaying culture.
The reality is, however, that those with political power and economic ability are few and do not want to pay tax. Moreover, those without political power are many, have almost nothing to tax, and do also resist paying taxes. It follows that the challenge for taxation is to raise domestic revenues from consenting citizens in poor and increasingly open economies. It should be added that most of these economies are not growing rapidly. Another reason for the reforms was due to increased awareness of the extensive administrative problems and constraints connected with tax systems in Namibia, resulting in widespread tax evasion and enforcement problems. Thus, developments brought the issues of simplification, tax administration and tax enforcement to the core of central government tax reforms. Many administrative procedures, including the procedures for reporting tax revenues, lack transparency and are poorly monitored both within the tax administration. Moreover, the legal sanctions to enforce punishments on either taxpayers or collectors who do not comply with the law are often weak, if existent at all. Each of these factors contributes to a non-transparent and complicated tax system, where taxpayers’ are left to the discretionary power of tax officers.
In conclusion, improvements in tax administration will be more effective if there is also a strengthening of the political will to collect taxes. Perhaps most fundamental, government leaders and parliaments must express a much greater political will to collect the needed revenues by, among other moves, eliminating undesirable exemptions and the
use of noncash methods of paying taxes.