Simplicity key on tax policy
One of the least significant line items in the recently passed supplementary budget was also perhaps the most eye catching.
In yesterday’s edition of the Samoa Observer it was revealed that the tax office is looking to go digital in its efforts to clamp down on local tax evasion (“Smart card readers to strengthen tax evasion”).
A total of $10,000 tala was budgeted for the rollout of so-called smart card readers, designed to guard against business’ undercounting at the tax register. A further $36,000 was allocated to staff to oversee the program.
We can’t take issue with the policy’s aim.
But digital detection is at best a second-order priority for taxation problems such as Samoa’s massive cash economy. Solving them requires more frontline inspectors, something that was absent from the 2019-20 variation.
Tax evasion by retailers is an issue of ongoing concern and something regular readers of this newspaper have seen continues to be reported on.
We can’t help but compare the amount allocated to this policy to the $100,000 reserved for a new standby generator for the Ministry of Customs and Revenue’s K9 Unit as a measure of its seriousness.
(Among their many virtues, dogs can see in the dark.)
This is not to say that taxation policy in Samoa has not been moving broadly in the right direction.
In fact, we commend what the Ministry had achieved in a short space of time by significantly broadening Samoa’s tax base and making it fairer.
The Government has done a reasonable job of moving away from taxes on trade which have historically been a honeypot for corruption, towards the Value Added Goods and Services Tax (V.A.G.S.T.)..
Enforcement, however, is another story.
In 2017 the Government announced a Revenue Review aimed at increasing the collection of excises. As observers from the International Monetary Fund have noted it has not substantially increased collection.
Raising taxes on everyday Samoans is a far from desirable policy goal. Many people in this country are already hurting financially from the extraction of taxes from their paycheques. Where taxation policy must change is promoting equality before the law.
In the decade to 2017 everyday Samoans upped their contributions to Government coffers by $44 million a year.
For corporations over the same period the figure stands at $12 million a year.
These figures from the Organisation for Economic Cooperation and Development show us the massive potential benefits from enforcing corporate taxation.
Recent evidence of tax evasion is all around us.
As the Samoa Observer revealed last year a major retailer was issuing outdated receipts; a problem that was remedied one day after our publication of an investigation. The case continues to be investigated.
A spate of robberies last year relating to businesses and individuals being targeted for holding immense amounts of taxation further suggests ongoing evasion by businesses.
The Minister for Customs and Revenue, Tialavea Tionisio Hunt, has said a crackdown on businesses hoarding large amounts of cash needs to happen.
We are in furious agreement.
But it’s unclear how electronic devices are going to tackle the size of our grey tax economy.
Aside from the problem of enforcement, the Ministry is also locking its horns with two major policy issues on taxation fairness this year.
The Government is working on a scheme to levy a tax on businesses who produce waste. Currently the average taxpayer is footing the bill.
Shifting the burden onto business makes sense. An intelligently engineered tax on the import of goods that will only end up as expensive waste products would be a good place to start.
Perhaps the toughest tax quandary of all though, is on our waters.
Government revenues from “transshipment” in Samoan waters have been growing in recent years. (Transshipment involves international ships docking in Samoan ports to transfer their cargo load from one vessel to another.)
It is becoming widely suspected within the Government that Samoa becoming the favoured destination in the Pacific for this practice is no coincidence. It is instead conjectured that our systems for weighing ships’ cargo loads and calculating their taxes have holes in them.
We’ve come a long way on taxation.
But significant challenges remain. Solving them won't be easy, or quick, but it needn't be complex either.