Tax unit's headaches when dealing with self-employed
A self-employed person who over the last three years received an average VAT refund of Lm315 a year and paid an average of Lm25 annually in income tax would now be paying Lm1,219 more in income tax and Lm3,176 extra in VAT, the head of the tax compliance unit Paul Barbara said.
Other cases involved people who would start paying Lm1,000 more in VAT and Lm1,800 extra in income tax.
Mr Barbara said in an interview that the unit tried to reach tax agreements with self-employed in various sectors. When they refused, their case would be referred to the income tax and VAT departments which would delve deeper into the matter.
Over the past weeks, the unit has been involved in exercises to reach agreements with medical practitioners and mechanics and panel beaters. The latter two sectors were not very cooperative and many cases were referred to the VAT and inland revenue departments.
The unit is manned by 27 professional graduates, the majority of whom work on investigations but a few focus on tax agreements and try to strike individual deals with taxpayers about the amount of tax they should be paying for the next three years.
"Taxpayers continually resist. Although, according to law. accounts have to be kept up to scratch daily, whenever we investigate we always face excuses that the accountant was sick or that he was unavailable. We know that they would be biding time to cook the books but in the end people get caught," he said.
The unit has access to a range of databases related to VAT, imports, exports, car and boat ownership; hence it is possible for the department to come up with an assessment of what people should be paying.
"The scheme is voluntary and contracts are drawn up for a three-year period after which it would be revised. One can work more, earn more and still pay less than what one should be paying because when agreement is reached one only pays the amount agreed upon. But we still find a lot of resistance," Mr Barbara said.
The unit does not investigate people on its own accord but only those selected by a board, which is chaired by the Minister of Finance and made up of the VAT and inland revenue commissioners, the unit head, the Director of Social Security and the Comptroller of Customs.
"The unit does not investigate employees. We investigate taxpayers who the board feels should be probed. When a report is drawn up, it is sent to the departments concerned which then draw up bills and chase up payments," Mr Barbara explained.
"Our workload is not small. There are some 55,000 self-employed many of whom claim not to earn enough to pay income tax," Mr Barbara said.