Financial ExpertSpeak: MRA to crackdown on tax evasion in hospitality & construction
Sudhamo Lal, director general, Mauritius Revenue Authority (MRA), also highlighted some steps planned by the agency to facilitate tax compliance of small scale operators this year.
Sudhamo Lal, director general, Mauritius Revenue Authority (MRA), spoke to AfricaMoney on how tax collections for 2013 were in line with economic growth. Our financial expert highlighted some steps planned by the agency to facilitate tax compliance of small scale operators this year. He went on to detail MRA’s strategies to crack down on tax evasion, with a dedicated Special Measures Unit lined up for 2014 which will focus mainly on the hospitality, restaurant and construction sectors.
Edited excerpts from an interview:
What was the total revenue collected in 2013 and how does it compare to 2012?
During the calendar year 2013, MRA collected Rs 61.8 billion of revenue which represents an increase of 6.4% over the preceding year. In fact the growth in collections has been broadly in line with the rate of economic growth for the year 2013.
Ninety percent of MRA’s collections come from three major sources, namely VAT, income tax and excise duties. During the year, VAT receipts which grew by 4.4% were dampened by the reduction in imports with VAT collected at importation falling by 2% over the preceding year. Corporate income tax registered a growth of 5% whilst personal income tax receipts, boosted by the salary increase in the public sector, grew by 17%. Excise receipts increased by 4% in 2013 as the additional receipts expected from the increase in the rates of excise duty for alcoholic products and tobacco were moderated by a slight fall in consumption of these items.
What are some steps that have been taken to recover delayed and non-paid taxes?
The year 2013 was yet another exceptional year for the MRA in terms of collecting tax arrears. In fact, we managed to raise Rs 1.7 billion out of our tax arrears thereby setting a new precedent since the establishment of the MRA in 2006. I must say that the tax incentive schemes, in particular the Tax Arrears Settlement Scheme (TASS) and the Voluntary Disclosure of Income Arrangement (VDIA), by giving interest and penalty waivers for settlement of tax debts or agreement on the amount of tax assessments raised by the MRA (instead of having recourse to tax objections and appeals) have contributed to increasing debt collections.
The MRA can have recourse to various instruments to recover tax debts such as attachment orders (e,g on bank account, salary, receipts on performance of contract for goods and services), inscription on immovable property, distress warrants, objections to leave the country, prosecutions etc. The Revenue Laws also empower the MRA to proceed with the sale of the assets of a tax debtor to recover any outstanding amount.
How efficient is the tax collection process in terms of collecting money from the informal sector?
The MRA has a wide network of third party information which allows the organization to identify recipients of income in various sectors of activity, including informal sector operators, and checkmate their tax compliance. During the last three years, our networking has enabled us to identify 9,700 persons who were not registered with the MRA and therefore were not meeting their tax obligations.
At the MRA we also have several teams carrying out field work activities with a view to identifying interalia informal sector operators. In 2014, we will further increase our visibility on the field – a dedicated Special Measures Unit (SMU) focusing mainly on the hospitality, restaurant & construction sectors has been set up and has started carrying out surprise visits over the island to monitor tax compliance.
I must also say that some operators may choose to remain in the informal sector due to lack of tax knowledge to prepare and file their tax returns. At the MRA we fully recognize the importance of taxpayer education to address these concerns and we have accordingly revamped our taxpayer education programme. Similarly, every year we strive to improve the facilities we provide to taxpayers to enhance their tax compliance. This year we will facilitate the tax compliance of small scale operators through simplified tax returns, simplified recordkeeping requirements and advisory visits for return filing, book keeping and maintenance of records.
MRA has recently launched the e-filing through smart applications facility. Please advise how users can expect to benefit from this new development?
Since the launching of e-filing facilities for individual taxpayers in 2007, the MRA has continuously improved the quality and variety of electronic services offered. While only 1,500 electronic returns from individual taxpayers were sent to MRA in 2007; last year MRA received more than 117,000 electronic individual income tax returns, representing around 90% of the total number of individual returns received. We can now safely say that electronic filing is universal for individual taxpayers. The introduction, this year, of e-filing facilities to users of electronic mobile devices, goes in line with MRA’s Mission to continually modernise revenue administration. With this facility, the users of smartphones, tablets and other electronic devices connected to the Internet will be able to access an interactive, html based, Income Tax Form which takes less time to load. Instead of the traditional electronic, pdf-based form, the taxpayers will be prompted with a series of questions which will determine very quickly his tax liabilities. He will then be able to save a draft, print and preview the form before the final submission to the MRA. By registering for MRA’s electronic services, taxpayers will also get a pre-filled return and benefit from enhanced modes of payment. Another new service offered to taxpayers this year is the possibility to pay individual income taxes through credit cards up to a maximum tax payable of Rs 25,000, with the MRA bearing the annexed charges of this electronic transaction.
In terms of likely users, how many taxpayers are expected to migrate to the smart applications facility?
Although the new facility was developed so that it is portable on any platform and device like iPad, Mac and smartphones, the fact that it is more user friendly is bound to make it popular even among habitual Windows-based PC users. As per current statistics, 70% of taxpayers are choosing this mode for e-filing this year. Its popularity is also bound to increase as tablets and smart phones have already become the most common mobile computing devices.
Form 1A has been amended to let employees with other source of revenues to declare them easily. Can you comment on the implications of this amendment from a user perspective?
In preceding years, we have received complaints from taxpayers that the 1A Income Tax Form did not include relevant fields for them to declare their non-salary income. Our position at that time was that Form 1A was reserved for those taxpayers deriving exclusively emoluments income and that any person deriving a mix of emoluments and non-emoluments income should file the 01 Income Tax Return Form.
However, with a view to facilitating tax compliance, the MRA has reconsidered its stand on this issue. We are now giving an opportunity to primary and secondary school teachers to include their private tuition income in the 1A Income Tax Form itself. Similarly, salaried taxpayers in the public and private sector, in receipt of other types of income, such as rent, may also declare the same in their 1A return.
I must also say that the amendment to the 1A Form also stems from several cases of non-declaration of “other income” by salaried taxpayers. In fact, every year data matching between income tax returns and MRA’s third party information database reveal that many salary earners were in receipt of “other income” but were not declaring same. As a result, these taxpayers had to settle relatively high tax bills comprising of undeclared tax as well as penalties and interest. I trust that salaried taxpayers will now take advantage of the new revised 1A Income Tax Form to declare all their income and avoid payment of penalties and interest.
Can you tell us more about the Free Income Tax Assistance (FITA) campaign to be run in 17 regions in Mauritius and Rodrigues on the 29th and 30th March 2014?
The Free Income Tax Assistance Campaign (FITA) is an activity that the MRA organizes every year in order to assist taxpayers in filling their individual income tax forms and paying their taxes in the centers identified for the organization of this event. In 2013, the MRA provided assistance to some 6,500 taxpayers during this campaign in the 17 FITA centers. The objective of this activity is to come closer to the taxpayers in an attempt to cater for those who may find it difficult to come to MRA’s head office to file their returns and pay their taxes. During this campaign some 100 MRA officers will be working in the 17 centers scattered around the island, including Rodrigues and will provide assistance from 8.30 a.m to 4 p.m to taxpayers visiting those centers. I wish to underline that the MRA will provide IT equipment and internet access facilities in all these 17 centers, to enable taxpayers to file their individual income tax forms electronically.
The MRA recently cracked down on tax evasion by businessmen. How can the public help in directing the MRA to instances of suspected tax evasion?
It is part of MRA’s strategy to enlist the taxpayers in the fight against tax evasion. During education campaigns the MRA puts a lot of emphasis on the importance for taxpayers to assist the MRA in identifying non-compliant taxpayers. The public can send to the MRA, information relating to those persons who they suspect of tax evasion through its website under the menu “contact us”. They can also send us an e-mail on email@example.com or write a letter to the Director General, MRA with the mention “Confidential”.
Actually, the MRA has launched this year a campaign aiming at establishing a tax culture in Mauritius and the first phase of this campaign concerns VAT compliance. The MRA is seeking the support of the public to ensure that the VAT Registered persons issue a receipt for every transaction. This will enable us to verify that the persons concerned are remitting the actual money collected under VAT to the MRA. To further motivate the public to adopt this good habit of claiming a receipt for every purchase, the MRA has launched a VAT Lucky Draw Scheme whereby the public is invited to claim a receipt and send to the MRA the details of the receipts. A draw organized under the supervision of the MRA every quarter will enable the public to win 20 prizes worth a total of Rs 210,000.