David Lo Anghuwo
Taxation is the significant element in managing national income, especially in developing and poverty-stricken countries.
From this backdrop, low tax compliance constraints the capacity of the government to raise revenue for developmental projects and it implies that, with a surge in revenue generation, the government will increase capital expenditure to enhance the living standard of the people.
Raising sufficient tax revenues remains a major challenge for many countries, including Namibia, especially in light of the impacts of the Covid-19 pandemic. Taxpayer education can be a key tool to boost the willingness of individuals and businesses to voluntarily pay tax, and play a vital role at the heart of mobilising tax revenues for the government.
Tax compliance is when taxpayers decide to observe tax laws and regulations by filing returns and paying tax accurately (Mittone & Saredi, 2016).
As per the second edition of Building a Tax Culture, Compliance and Citizenship: A Global Source Book on Taxpayer Education, it analyses a unique dataset of 140 taxpayer education initiatives deployed in 59 developed and developing countries around the world, offering a classification of different approaches to taxpayer education, and identifying common challenges and solutions.
With over 80% of taxpayer initiatives reported to generate an improvement in tax morale, the intrinsic motivation to pay taxes, the study shows that increasing tax literacy can play an active role in shaping a country’s tax culture, in which citizens understand the effects of paying or not paying taxes on their daily lives.
Most countries have done much better in collecting taxes. For example, Japan’s tax compliance level is more than 90%. The National Tax Authorities (NAT) of Japan have been successful in promoting voluntary compliance through the four pillars of tax compliance, and one of those pillars is tax education (Yok, 2009).
Having a look at Australia, the Australian Tax Office created a programme called “Teaching Tax with Tax Files” in 1998 to teach 9 to 12-year-old school children (ATO, 2009). The programme features a creative sight and sound tax education pack, which contains varying media which provides current data on tax collection. The programme is relied upon to instruct school children on the diverse wellsprings of funds of the government and the obligations of a citizen, and to build their comprehension of the part that tax assessments play in a society, including the association between taxation and the provision of public amenities.
World Bank
Other reports by the World Bank have also indicated that taxpayer education has provided a good foundation for tax collection in Tanzania (World Bank, 2017). The observation has been made that taxation education improves tax compliance behaviour of taxpayers, as they become mindful of their responsibility and penalties for not complying with the taxation laws (Berhane, 2011). Moreover, tax education is considered as one compliance instrument that gives citizens the capacity to grasp taxation laws, which in turn increases their readiness to follow these laws (Kasipillai et al., 2003).
As per Amukeshe’s report dated 09 April 2021, Namibia’s ever-increasing debts are partly the result of citizens and businesses not paying their fair share of taxes. If they did, the budget deficit would decrease, which would lead to a significant reduction in national debt, which was expected to reach N$130 billion by the end of that fiscal year, as per the analysts when they were responding to a shocking percentage revealed by the commissioner of the Namibia Revenue Agency (NamRA).
According to Shivute, tax compliance in the country was woefully low and needs to improve. It is noted that tax compliance in Namibia stands at 57%, which is very low. Even within the 57%, not everyone is declaring what they are supposed to pay.
Local economist Salomo Hei said all hopes are pinned on the agency to fulfil its mandate. Where revenue agencies are stand-alone, they tend to improve collections, and we hope NamRA can do the same.
As per one of the analysts who commented anonymously, the low tax compliance as stated by Shivute poses a risk to government revenue, lowering its ability to execute developmental projects that will drive economic growth, equality and poverty eradication efficiently.
If implemented successfully, efficient and increased revenue collections could help increase budgetary allocations to the developmental budget, which would hopefully translate to the productive and efficient implementation of these developmental goals. It’s important to note that the nation should strive to align expenditure to revenue, and make efficient use of the revenue collected.
Tax base
According to Eloise du Plessis, PSG Namibia’s head of research, she spotted that the size of the tax base in Namibia is problematic already. So, when compliance is low, this exacerbates the situation. One would hope that NamRa makes this easier and that more tax is collected. But in her opinion, it is more important to make it easier to operate for small businesses to create good jobs. This will broaden the tax base. Trying to tap more blood from a stone is not sustainable. We already have one of the highest tax-to-GDP ratios in the world.
A lack of well-educated and well-trained staff and taxpayers’ limited ability to keep accounts hinders the establishment of an efficient tax administration.
While taxpayer education can take various forms, reports identify three main approaches:
Teaching tax, through in-depth, often long-term engagement with all types of audiences, whether young people, adults or entrepreneurs.
Communicating tax, through higher-level awareness-raising engagement with taxpayers. Such initiatives span social media campaigns, tax fairs and TV shows.
Supporting tax compliance by providing practical and direct assistance to taxpayers to facilitate the use of modern e-administration (ITAS) tools and to support taxpayers, especially vulnerable taxpayers, in their tax obligations, including reporting requirements.
Educating taxpayers is not just the occupation of tax administrations. Many of the initiatives presented in the tax study demonstrate the value of effective partnerships with other stakeholders such as schools, business associations and non-governmental organisations.
Taxpayer education is not only about learning in a formal setting, it is also about communication between citizens and tax administrations, including reminding taxpayers of important deadlines, and being transparent and explaining how revenues are used in a way citizens can understand. Taxpayer education also encompasses reaching out to groups of citizens who have limited contact with the tax administration, for instance because they are vulnerable, are far from major cities and villages, or lack access to technology and networks, specifically deep north.
Benefits
Taxpayer education is a means to building a tax culture, compliance and citizenship. It is not only about encouraging people to pay taxes, but also about explaining taxation and its place in society as a whole.
Citizens, whether taxpayers or not, benefit from understanding the effects of paying or not paying taxes, both on their daily life and on that of their country.
They also benefit from practical knowledge or assistance, for instance on how to actually fill in their tax returns. By increasing tax literacy and tax morale, taxpayer education also results in taxpayers being more likely to help tax administrations fight tax evasion and tax fraud.
Lastly, taxpayer education is a long-term strategy whose main aim is to build a culture of voluntary compliance, an aim that cannot be achieved in the short-term. While some aspects of taxpayer education may show short-term impacts, the ultimate objective is almost always to establish long-term behaviours.
This article is concerned with the relationship between tax education and tax compliance behaviour in Namibia. This topic is highly important, as tax education influences the compliance level, which in turn can hamper the government’s ability to provide public amenities for its citizens. Therefore, when the problem is checked and monitored, this may help increase revenue. In turn, the provision of social amenities and other infrastructure becomes possible, and the dependency on international grants and loans will be reduced. If the evasive activities continue to be unchecked, sooner or later, the government will continue to be indebted.