The Director General of the Mauritius Revenue Authority (MRA) talks about the tax season which started a few weeks ago and his expectations in regard to this exercise. Tax evasion, tax collection, the merger of the Registrar General Department into the MRA… he says it all.
Tax collection season for 2016 has already started. So far the MRA has received 18 000 Tax Returns. What changes have you brought in this new edition?
The 2016 tax season has started on the 24th August and as at date we have already received around 26,000 returns. Whilst as regards the income tax return itself, there is no major change, MRA recently launched the MRA Portal and has provided additional facilities to the taxpayer.
However, as the Taxpayer Portal contains confidential information on the taxpayer, the taxpayers can only access using their User ID and password. Besides the pre-filled tax return, taxpayers can view their returns for previous years and check the status of refund if there is one and any outstanding tax debt. As Taxpayers can view previous returns they need not print a copy of their return. It is also to be noted that a range of other facilities would be added on the Taxpayer Portal in future to assist the taxpayer in his tax filing obligations.
In a previous statement, you mentioned concentrating on e-Filing of Tax Returns. What about those people who don’t have a password? Will they be able to do their e-Filing too?
Many tax administrations around the world, when they started e-filing, required taxpayers to be first registered for the facility and were allocated a password to use the system. MRA has handled the issue differently, so that the system with User ID and password and the system without User ID have co-existed for more than 3 years. The taxpayers have attained maturity in e-filing and are sufficiently at ease with it to use the User ID and password for a range of additional facilities being offered by MRA, besides the pre-filled tax return.
Last week, MRA despatched more than 152,000 mailers containing the password to taxpayers who had not used it previously. Theoretically, every person from whom MRA is expecting a return has been provided the password. However, in some cases there could be new taxpayers being added and there are also some mailers that have returned undelivered. Rest assured that MRA is monitoring the situation closely and would do the needful to provide them access to e-filing. Anyhow, at the MRA Customer Service Centre and FITA Centres, taxpayers do not need the password to file their return.
In terms of tax collections in general, how much revenue the MRA expects to collect with the present exercise?
MRA is expected to collect Rs 76,135 million in FY 2016/17 which represents an 8.7% increase over the preceding year. In FY 2015/16 we collected some Rs 70,023 million which represented an increase of 5.5% over the preceding period and some Rs 250 million above the revenue projections set out in the Budget.
How has the cost of collection of the MRA evolved over the past three years?
The cost of collections has been below 2% since the inception of the MRA in 2006 up to the year 2013 and slightly above 2% in 2014. In 2015, the cost of collections had risen to 2.61% but it includes a cost of 0.33% which represents a one-off provision for sick leaves.
Which professions can we qualify as “habitual criminals” in terms of tax evasion?
“Habitual criminals” is a strong word. At the MRA, we have mainly observed that it is those businesses dealing in cash, the informal sector businesses and the professionals who are usually not fully tax compliant. A sectorwise analysis of assessments raised by the MRA shows that significant under declaration of tax has been identified within the trading, real estate, professional, construction, accommodation and food service activities sectors.
Recently, we have recommended to the Government the introduction of a requirement for Statement of Assets and Liabilities to be submitted by High Net Worth Individuals together with their annual income tax returns. This requirement already exists in a number of countries and will enable the MRA to better track these individuals and monitor their tax compliance.
Different measures have been taken by the MRA to fight tax evasion. What has been the result of such actions?
The fight against tax evasion is a continuous battle. On the one hand, we need to track down those taxpayers who do not file their tax returns. On the other hand, we need to unveil the tax evasion schemes utilised by another group of taxpayers to under declare their tax liability.
In 2015 only, we have registered some 5,319 new taxpayers as a result of our field audit activities and utilisation of third party information. If we extend our coverage to the last eight years, the number of new taxpayers registered following MRA actions is 28,075
Similarly, in 2015, the amount of tax assessments raised by the MRA had reached an unprecedented Rs 5,548 million as compared to a mere Rs 388 million when we started operations in 2006/07.
Over the past ten years, we have observed significant improvements in self-assessments collections whether personal income tax, corporate income tax or VAT. They can be attributable to the various enforcement actions and facilitation measures taken by the MRA over the years.
What is the loss incurred by the Government of Mauritius through tax evasion?
Since our inception in 2006 we have already raised some Rs 24 billion of tax assessments for failure to comply with the tax legislations. This figure already gives you an indication of the loss incurred by Government through tax evasion. However, it is not possible for any tax administration in the world to track all tax evasion cases, due mainly to lack of information and human resource constraints.
“It is not possible for any tax administration in the world to track down all tax evasion cases…”
The MRA has been invited to collect an advance recycling fee for electronic and electrical equipment. What could be the rates of this fee?
As far as I understand, that is- sue of rates is still being discussed by the policy makers and a Committee has been set up at the level of the Ministry of Environment to look into the same and come up with recommendations. MRA Customs is represented on that Committee. I trust that the rates will be communicated soon.
For the last two years, what has been the value of electrical and electronic equipment imported and who are the suppliers?
The value of electrical and electronic equipment imported in 2014 and 2015 was almost Rs 8 billion in each year. There were 4,454 importers in 2014 and 4,558 importers in 2015.
The MRA will have to apply tax exemptions with respect to some sectors. Many of them will benefit from a tax holiday ranging from 5 to 8 years. What does that imply?
The objective of granting a tax holiday is mainly to alleviate companies from the burden of paying taxes. This tax amount can be ploughed back in the business to allow it to grow and at the same time create employment in the country. It is common around the world for policy makers to give short term tax exemptions to Small and Medium Enterprises especially in their initial years of operation.
What would those exceptions have provided in terms of income had they not been imposed?
In terms of businesses which are not yet in operation or have not yet submitted their first year returns, it is difficult to give you an estimate of the revenue foregone. As regard the four-year tax exemption given to existing small enterprises with turnover not exceeding Rs 10 million, I guess that the revenue foregone could be around Rs 100 million.
What would be the consequences of the incorporated Registrar General Department into the MRA?
The incorporation of the Registrar General Department into the MRA was first discussed when the MRA was being set up in 2006. But at that time, there was a major difference in the degree of automation of the Registrar Ge- neral and the erstwhile Tax and Customs Departments and inte- gration was not deemed feasible.
Since then, the Registrar General has undergone significant enhancements on various fronts and the integration of the Registrar General into the MRA is now possible. Of course, this integration will require discussions with various parties involved at the appropriate time
At the level of the MRA, we believe that the integration will further facilitate taxpayers as they will effect payment of all taxes at a single organisation. At the same time, the MRA will have direct access to data on purchase and sale of immovable properties for tax compliance monitoring purposes.