Taxation crackdown urgently needed - for justice's sake
Sitting in the centre of town is perhaps the most crowded corporate office you will ever see.
The 2016 scandal of the Panama Papers, and the recent motion picture the "The Laundromat" have immortalised Samoa's role as a global tax haven.
According to those famous leaks, one small Post Office box in the centre of Apia was the corporate headquarters of more than 25 different international companies. Foreign exchange services with head offices in Sydney; Taiwanese plastic manufacturers; and Chinese biotechnology researchers were all based out of the same metal box.
We’ve editorialised in these pages before about the embarrassment brought about by Samoa’s status as an international tax haven.
But as a story on the front page of last Thursday’s Samoa Observer pointed out, it’s time we started looking at the way in which domestic companies are complying with tax laws (“Outdated receipts sparks Coin Save investigation”).
Our investigation discovered that the popular chain was issuing wrongly dated receipts, something it said was the result of a malfunctioning computer system but which the Ministry of Customs and Revenue vowed to investigate urgently following our investigation.
We acknowledge receipt tampering is a tried and tested means of tax evasion but we do not suggest that is the case in the Coin Save matter or pretend to know what was going on behind the scenes at this retailers until an investigation concludes.
But the issue does raise some questions about whether the Government’s permissive attitude towards letting Samoa be used as a tax haven, is bleeding into domestic tax policy - with implications for the majority of Samoans but particularly the worst off.
A string of recent robberies targeting businesses suspected of holding large amounts of cash money on their premises raises serious questions about how compliant our businesses are with tax law and what money the Government and the people of Samoa are missing out on.
We applaud the Minister for Customs and Revenue, Tialavea Tionisio Hunt, saying he would launch an investigation into registered businesses with inactive bank accounts with a view to cracking down on taxation.
Doing so in other countries like Australia requires sophisticated data matching and this may be a case where technical foreign aid could well be helpful. A sustainable taxation base, after all, is the key to a stable Government.
We hope the Minister is entirely committed to the crackdown because, in our view, it could not come any sooner.
As it stands, regular Samoan citizens, including its poorest, are the ones who are filling the Government’s accounts while corporations are getting off relatively lightly.
A 2018 Organisation for Economic Co-operation and Development (O.E.C.D.) study found that more than 75 per cent of Samoa’s recent tax revenue had come from Value Added Goods and Services Taxes (or V.A.G.S.T.). That made us the highest in the Asia-Pacific region.
These taxes, of course, are imposed on everyday consumer items and mean that every time someone buys a loaf of bread they are contributing to Government coffers. The problem with V.A.G.S.T. is it is no respecter of income: someone earning minimum wage pays the same amount of tax on a chocolate bar as someone earning $100,000 tala a year.
What about businesses? They accounted for just under 9.5 per cent of the Government’s tax take, making us the lowest-ranked country in terms of Corporate Income Tax collected, compared to rates as high as 41 per cent in Malaysia, 28 per cent in Papua New Guinea and over 20 per cent in Fiji.
Something is wrong with this picture.
The total amount of tax being collected by our Government is relatively high.
We take in more money (as a percentage of our GDP) than our neighbours such as in the Solomon Islands, Fiji and Papua New Guinea. That figure is increasing, too, according to the report.
But unlike those other countries, it’s mostly being collected at the checkout counter in the form of ordinary people’s purchases not out of businesses profits, or rich investors' capital gains.
We’re calling for an investigation to reverse this unjust balance with the use of all the tools available to the Government. (In Indonesia, another country notorious for its low tax-base, the Government recently used a fleet of drones to identify farms and cross-match their size with the amount of tax that they were paying).
No stone should be left unturned.
Recent figures show Samoa’s economy is returning to health with a growing G.D.P. of 5.7 per cent.
Let’s hope that growth continues but also that businesses who are growing are paying their fair share of the taxes owed to Government.
Unlike international tax evasion, this has a real cost attached, much greater than reputational damage. And we're footing it.
What do you think, Samoa? Have a blessed Wednesday.