We should all be paying our share of taxes

Editorial

THE Internal Revenue Commission, by its own admission, is unable to collect all taxes due to the State so any move to decentralise that responsibility will be a step in the right direction.
Prime Minister Peter O’Neill told the Parliament last week that the Government was looking at handing over the task of collecting goods and services tax (GST) to the provincial governments.
According to O’Neill, a large number of companies operating in the country are not paying their fair share of taxes because the responsibility of regulating and collecting tax is centralised to the Internal Revenue Commission (IRC).
The IRC alone, with its limitations in resources, especially manpower, is unable to collect all taxes on its own at the moment.
This has been an ongoing problem for many years.
As a result, many companies operating in parts of the country where the IRC is not represented or limited in its reach are not paying taxes because no one is there to effectively follow up and collect the taxes when they are due.
Therefore, in some instances it may not be entirely the fault of companies that their dues in tax revenue are not collected in a timely manner.
Provincial administrations, under their respective finance divisions are better suited because they are on location and are able to collect the taxes much better.
O’Neill told Parliament that the decentralising of tax collection powers may be happening as early as next year.
It will be factored in when officials frame the 2018 national budget in the next few weeks which will be handed down in November.
This change will be welcomed by governors who have wanted powers to raise taxation revenue from businesses operating in their provinces.
The additional revenue stream in GST will greatly assist the provincial governments meet the cost of service delivery which is obviously a lot higher in rural districts than in urban areas and therefore require additional resources.
Some years ago, under the value-added tax (VAT) regime, the provincial governments and the IRC (national government) had shared taxes collected in provinces under an agreed formula.
This could also be applied in this new approach by the current government to devolve taxation powers again to the provincial governments so provinces share some of their tax revenue with the rest of the country.
The IRC’s inability to draw all companies operating in the country into the tax net has been a difficult task and some may have actually taken advantage of that for a long while now.
When this happens, businesses may be seen to be growing and the economy appears robust in central locations but further out into rural areas, conditions remain backward because the responsible provincial and local level governments are starved of much-needed revenue.
This creates a lop-sided sense of development.
It is said that evading taxes is illegal but avoiding paying unnecessary tax is smart and one way to build wealth.
Unfortunately, a lot of those who are not paying their taxes can be branded as tax evaders.
This is because they have knowingly taken advantage of the IRC’s inability to effectively collect taxes from them.
Tax evasion is the illegal practice of not paying taxes, by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed.
In businesses, tax evasion can occur in connection with income taxes, employment taxes, sales and excise taxes, and other taxes.
Tax avoidance, on the other hand is the legitimate minimising of taxes, using methods approved by the IRC.
Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means.
The IRC has had to deal with a lot of tax evaders and much tax revenue that it should rightly be collecting remains outstanding.
The provincial governments, being a lot closer to companies operating with the provincial capitals or rural districts should be better placed to deal with tax matters and improve the overall situation.
That is the expected outcome of the move announced by the Prime Minister last week.

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