A Chinese-owned construction company which has paid no corporate tax in Namibia over a five-year period in which it had a total taxable income of nearly N$930 million has suffered a setback in its attempt to have N$33 million returned to it, a month after the tax authorities seized the money from its bank account.
In a judgement delivered in the Windhoek High Court on Friday, judge Eileen Rakow dismissed an application by the company Zhong Mei Engineering Group for a court directing the Namibia Revenue Agency (Namra) and the minister of finance to return an amount of about N$33 million which was seized from an account of the company at Standard Bank Namibia in July.
Rakow noted in her judgement that she had no reason to conclude that the concept of “pay now, argue later” should not apply to the case that Zhong Mei filed against Namra, the finance minister and other parties in reaction to the seizure of money from its bank account.
Rakow also stated that the N$33 million that Namra requested Standard Bank Namibia to transfer from Zhong Mei’s bank account should remain with Namra for now, as that is in the public interest.
According to the “pay now argue later” concept taxpayers are obliged to first pay their assessed taxes before they can dispute their tax liability.
Zhong Mei Engineering Group has received several large construction contracts in Namibia.
Projects in which the company has been involved include the construction of a new road between Windhoek and Hosea Kutako International Airport, the upgrading of the road between Oshakati and Ongenga in northern Namibia, and the upgrading of the road between Swakopmund and Henties Bay, Uis, Khorixas and Kamanjab in the Erongo and Kunene regions.
According to Namra, the company submitted tax returns showing it was liable to pay no corporate taxes in Namibia from the time of its registration in 2013 to the end of August 2018.
However, during that period, the company was actively trading and was awarded contracts for various government projects that generated about N$926,5 million in revenue for the company, Namra has stated in documents filed at the Windhoek High Court.
According to the tax agency, it has calculated that over the three years from the start of October 2015 to the end of September 2018, Zhong Wei should have paid a total amount of N$33 million in tax: a sum of about N$10 million in the 2015/16 tax year, N$6,3 million in the 2016/17 tax year, and about N$16,7 million in 2017/18.
In an affidavit filed at the court, Namra commissioner Sam Shivute said “tax or taxation […] is compulsory and not an optional contribution to be paid at the convenience of the taxpayer”, and that the obligation to pay tax at the prescribed time is imposed by law on the public as a whole in the interest of the state and of the Namibian public.
Shivute said Namra decided to carry out a reassessment of Zhong Mei’s tax returns after the company declared it was liable to pay no taxes from 2013 to 2018 – despite it having received chargeable income of N$926 million over that period.
Shivute also said there is “a huge challenge” in Namibia’s tax system, with a large disparity between taxes paid by individual taxpayers, compared to corporate taxpayers “who have been derelict of their duties to pay taxes over the years”.
“The tax burden is hugely skewed against individual taxpayers,” Shivute stated.
He pointed out that while someone employed as a cleaner in the government would have had to pay income taxes totalling about N$36 500 from 2013 to 2018, Zhong Mei, with a chargeable income of N$926 million over the same period, has paid no tax on that income.
Namra appointed Standard Bank Namibia as its agent in terms of the Income Tax Act and directed the bank to pay an amount of N$33 million from Zhong Mei’s bank account to the minister of finance around 12 July.
After Namra had taken that step, Zhong Mei filed a case in the Windhoek High Court in which it is asking the court to review and set aside the decision to appoint the bank as an agent of Namra, to declare Namra’s tax assessment of Zhong Mei as invalid, and also to declare unconstitutional the section of the Income Tax Act under which an agent like a bank can be appointed to have tax paid from a taxpayer’s account to the government.
Zhong Mei also asked the court to in the meantime order that the amount of N$33 million seized from its account at Standard Bank Namibia should be returned to the account.
This part of the company’s application was refused by Rakow on Friday.
The case lodged by the company has been postponed to 5 September.