So much more to do on tax collection
Samoa is, to borrow a phrase, becoming a sunny place for shady people.
Its reputation as an international place for companies with an abundance of money and shortfall of principles was immortalised last year in “The Landromat”.
Antonio Banderas, in character as one of the founders of perhaps the dodgiest accounting firms of all time, Mossack Fonseca, listed Samoa as one of a handful of countries his firm targeted because tax laws were so weak.
“[These are] places that are-- are not blessed with natural resources or industry,” Banderas’s character said.
In this case, truth is not stranger than fiction but reflects it fairly accurately.
According to a list of tax havens released by the European Union in February, Samoa remained on a list of about a dozen countries and territories on a tax evasion blacklist.
This is despite the fact that Samoa had promised the E.U. in late 2018, to change its tax policies. Despite these undertakings, nothing changed.
In response to recent criticism that Samoa had become reliant on dirty money, the Prime Minister, Tuilaepa Dr. Sa'ilele Malielegaoi, reminded of the benefits of offshore companies using Samoa as a tax haven:
"It seems they are throwing around statements, forgetting that it is not something very nice but it is something that is very good; it is how we have been able to finance our sports," he said.
Given our Government’s willingness to be a moral outcast on the issue of global tax evasion, can it be any surprise that people and businesses in this country seem similarly indifferent about not paying their taxes?
In an article carried in yesterday’s edition of the Samoa Observer (“Skyline Co Ltd penalised by Ministry of Customs and Revenue”) we had a glimpse of just how open tax evasion in Samoa is - and how easy it is to detect.
The Skyline story was one in a series of Samoa Observer investigations into businesses in Samoa who are apparently evading tax. It showed the Chinese-owned company was issuing improper receipts to businesses that were handwritten and not part of any systemic accounting system.
The company sells olioli branded alcohol products and should be subjected to special exercises. Given the prices quoted by the company on the loose-leaf receipts provided to retailers, questions were raised about how the company could have been paying its tax duties while still selling goods at a profit.
Earlier this year, the Samoa Observer uncovered a similar instance of irregular accounting being employed across the franchise of the retail giant Coin Save. (The results of that investigation are still pending).
This suggests that the Ministry of Customs and Revenue (M.C.R.) is severely under resourced when it comes to auditing staff, or that its staff for enforcing the tax code is severely misdirected,
But unlike almost every other investment of Government money in the federal budget, investments in the M.C.R. are almost certain to generate positive returns for the Government.
We have not been told what the “substantial fine” levied against Skyline is. But it is almost certain that it could cover the costs of employing several more M.C.R. staff who were tasked solely with conducting on the spot audits that could uncover such schemes.
A culture of evading tax prevails in Samoa. The limits on the Government’s ability to collect revenues are severe.
According to the O.E.C.D. less than 25 per cent of Samoans filed a tax return in 2011; more concerningly, only 50 per cent of businesses filed Value Added Goods and Services Tax and Pay as you Earn statements.
In 2017, despite our economy growing in size, Samoa was only one of a handful of countries to register a decrease in the amount of tax it collected by 0.5 per cent.
In an attempt to tackle this issue the M.C.R. is bringing in a Tax Invoice Monitoring System that would automatically register transactions with the Ministry at the point at which they are sold.
This system appears to have no room evasion. But with the high cost of electronic point-of-sale machines and the difficulty with which they can be made compatible with a Government database, teething problems are foreseeable.
Only in recent years have high-tech solutions such as data matching been employed in countries such as Australia to catch out unsophisticated tax cheats and those who do not submit records.
But the number one tool for enforcing compliance is the same no matter the amount of technology at the disposal of tax authorities.
Digitised records make things quicker.
But audits, checking to see if a company is issuing receipts in compliance with the law, or randomly choosing selected businesses for a comparison between what they tell the Government and their internal accounts, are the most effective tool.
There has been extensive debate recently about the Government’s financial position. Its comparatively anaemic stimulus does more than lend these claims some credibility.
If the Samoan Government is to truly achieve independence and sovereignty, it must establish as dependable of a revenue stream for itself as it can.
So long as Samoa Observer staff can spot financial irregularities in the accounting of the country’s largest companies with ease, it is painfully obvious that more can and must be done.