NamRA shocks Chinese firm with N$33m tax deduction
Shivute unapologetic about sucker punch
Although it has made nearly N$1 billion from government tenders, the company's tax records show nil returns and no income made.
Shaking in its boots, a Chinese construction company has approached the High Court seeking a reversal of N$33 million the Namibia Revenue Agency (NamRA) abruptly deducted from its bank account in lieu of outstanding taxes.
The company, which fears imminent collapse, has accused NamRA of invading its privacy and using apartheid-like policies by collecting the outstanding tax directly from its bank account.
Zhong Mei Engineering Group, represented by Sisa Namandje, told the court that the tax agency coerced it into attending a meeting on 23 June under threat of sanction, and interrogated its staff members.
In his founding affidavit, managing director Jiang Chong Yuan said they have informed NamRA that they lost documents, including tax invoices, due to a dispute with their previous accounting firm.
Jiang wants the court to take note that they did not even object to an ‘intrusive’ visit by ‘unauthorised’ NamRA agents to the company’s premises and also attended a meeting called on short notice on 7 July.
“We were presented with four documents purporting to be a notice of assessment, indicating the total and combined tax payable in respect of income tax to be a net amount of N$33 031 543. NamRA’s employees demanded right in that meeting that the amount allegedly due in the above documents must be paid immediately.”
“At that meeting, we were surprised by such an assessment. We were unprepared for such a meeting. We pleaded with NamRA’s officials that the company would not be able to pay such an amount immediately or in the near future. We proposed to pay an amount not more than N$2 million and make arrangements to pay the rest while submitting objections to the purported assessment,” Jiang said.
Destructive
NamRA staff allegedly said they would respond to this request and make arrangements for the payment of the rest of the amount in instalments, and it is with this understanding that the Zhong Mei staff members left the meeting - only to find N$33 million taken from its account five days later on 12 July at about 10:00.
Jiang added that they also received a notification of this transfer from Standard Bank Namibia, which indicated that it was appointed by NamRA as an agent in terms of the law, and that it had paid over an amount of N$33 031 543 to the Bank of Namibia (BoN) at the instance of the tax agency.
He said NamRA did not consider that this deduction would be destructive for Zhong Mei, which may collapse if such an amount is taken in one go, and noted that the company has legal commitments requiring it to make payments to various third parties in the next few days.
He also urged the High Court to consider that it has recently lost a Supreme Court appeal where it is required to pay an amount of N$4 million and because of NamRA’s deduction, it would not be able to pay this money, including legal costs.
About Zhong Mei
Since 2015, the company has been working on several large-scale state projects, such as the Rundu abattoir upgrade and construction of the main and site buildings; the district road from Oshakati to Ongenga; University of Namibia hostel blocks at Neudamm, and the second phase of the construction of the ministry of fisheries’ new head office.
Zhong Mei has also worked on and upgraded the Swakopmund-Henties Bay and Uis roads as well as the construction of the Oshoopala bridge over the Okatana River in Oshakati and some low-income housing projects.
The new Windhoek to Hosea Kutako International Airport dual carriageway and the Swakopmund-Henties Bay-Uis-Khorixas-Kamanjab road are also amongst the company’s projects.
Dismissed
NamRA commissioner Sam Shivute dismissed Zhong Mei’s lamentations, saying the company has a total asset base of N$160 million in Namibia and a mere N$33 million, which in any event is due in payable taxes, won’t lead to its collapse.
“The applicant cannot suffer damages emanating from its own making - that is non-compliance with the payment of compulsory tax. The applicant had the benefit of the due tax for the years of assessment that it has not paid over to the fiscus,” he said.
“The applicant cannot say that it will suffer harm because the more than N$33 million due to the fiscus must first be applied to its operation obligations instead of benefit the public interest.”
He also pointed out that it is important to note that Zhong Mei does not deny that it is liable to pay tax at all, and instead proposed to pay it off in instalments.
According to him, the company was duly informed that this proposal was dismissed.
Nil returns
NamRA said its audits show that the company recorded nil returns, no expenses and no income when it submitted its tax income return for 2013 to 2022.
“That was so, even though the taxpayer was actively trading and was awarded various government projects which generated revenue close to N$1 billion during 2013 to 2018,” Shivute said.
“The company claimed a deduction for entertainment, fines and penalties, and a loss on disposal lease on rental and gifts in its financial statements. Further, the company claimed deductions of salaries, wages and staff welfare for the 2013 to 2014 financial year when it was not registered for tax.”
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The company, which fears imminent collapse, has accused NamRA of invading its privacy and using apartheid-like policies by collecting the outstanding tax directly from its bank account.
Zhong Mei Engineering Group, represented by Sisa Namandje, told the court that the tax agency coerced it into attending a meeting on 23 June under threat of sanction, and interrogated its staff members.
In his founding affidavit, managing director Jiang Chong Yuan said they have informed NamRA that they lost documents, including tax invoices, due to a dispute with their previous accounting firm.
Jiang wants the court to take note that they did not even object to an ‘intrusive’ visit by ‘unauthorised’ NamRA agents to the company’s premises and also attended a meeting called on short notice on 7 July.
“We were presented with four documents purporting to be a notice of assessment, indicating the total and combined tax payable in respect of income tax to be a net amount of N$33 031 543. NamRA’s employees demanded right in that meeting that the amount allegedly due in the above documents must be paid immediately.”
“At that meeting, we were surprised by such an assessment. We were unprepared for such a meeting. We pleaded with NamRA’s officials that the company would not be able to pay such an amount immediately or in the near future. We proposed to pay an amount not more than N$2 million and make arrangements to pay the rest while submitting objections to the purported assessment,” Jiang said.
Destructive
NamRA staff allegedly said they would respond to this request and make arrangements for the payment of the rest of the amount in instalments, and it is with this understanding that the Zhong Mei staff members left the meeting - only to find N$33 million taken from its account five days later on 12 July at about 10:00.
Jiang added that they also received a notification of this transfer from Standard Bank Namibia, which indicated that it was appointed by NamRA as an agent in terms of the law, and that it had paid over an amount of N$33 031 543 to the Bank of Namibia (BoN) at the instance of the tax agency.
He said NamRA did not consider that this deduction would be destructive for Zhong Mei, which may collapse if such an amount is taken in one go, and noted that the company has legal commitments requiring it to make payments to various third parties in the next few days.
He also urged the High Court to consider that it has recently lost a Supreme Court appeal where it is required to pay an amount of N$4 million and because of NamRA’s deduction, it would not be able to pay this money, including legal costs.
About Zhong Mei
Since 2015, the company has been working on several large-scale state projects, such as the Rundu abattoir upgrade and construction of the main and site buildings; the district road from Oshakati to Ongenga; University of Namibia hostel blocks at Neudamm, and the second phase of the construction of the ministry of fisheries’ new head office.
Zhong Mei has also worked on and upgraded the Swakopmund-Henties Bay and Uis roads as well as the construction of the Oshoopala bridge over the Okatana River in Oshakati and some low-income housing projects.
The new Windhoek to Hosea Kutako International Airport dual carriageway and the Swakopmund-Henties Bay-Uis-Khorixas-Kamanjab road are also amongst the company’s projects.
Dismissed
NamRA commissioner Sam Shivute dismissed Zhong Mei’s lamentations, saying the company has a total asset base of N$160 million in Namibia and a mere N$33 million, which in any event is due in payable taxes, won’t lead to its collapse.
“The applicant cannot suffer damages emanating from its own making - that is non-compliance with the payment of compulsory tax. The applicant had the benefit of the due tax for the years of assessment that it has not paid over to the fiscus,” he said.
“The applicant cannot say that it will suffer harm because the more than N$33 million due to the fiscus must first be applied to its operation obligations instead of benefit the public interest.”
He also pointed out that it is important to note that Zhong Mei does not deny that it is liable to pay tax at all, and instead proposed to pay it off in instalments.
According to him, the company was duly informed that this proposal was dismissed.
Nil returns
NamRA said its audits show that the company recorded nil returns, no expenses and no income when it submitted its tax income return for 2013 to 2022.
“That was so, even though the taxpayer was actively trading and was awarded various government projects which generated revenue close to N$1 billion during 2013 to 2018,” Shivute said.
“The company claimed a deduction for entertainment, fines and penalties, and a loss on disposal lease on rental and gifts in its financial statements. Further, the company claimed deductions of salaries, wages and staff welfare for the 2013 to 2014 financial year when it was not registered for tax.”
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