ITD Africa Conference On Taxing Micro And Small Businesses

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ITD Africa Conference On Taxing Micro And
Small Businesses

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Designing Effective Service and Education
Programs for Micro and Small Businesses

• Parallel Session B
• Nthako Sekome
• Lesotho Revenue Authority (LRA)

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Presentation

• Design of taxpayer education programs Lesson
  Learnt
• Effective ways of reaching small businesses with
  services education
• Cooperation with private sector institutions and
  tax consultants
• How education programs are extended to reach
  small businesses role of local tax offices in
  delivering services
• Measuring effectiveness and SME satisfaction with
  services and education program provided
• Challenges ahead

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Introduction

• Most tax authorities operate the self assessment
  system which is based on the premises of
  voluntary tax compliance. This has shifted the
  burden on the taxpayer
• BUT we know that the level of understanding of
  complexity of the requirements of tax laws and
  the level of financial literacy differ
  significantly between large and small businesses.
  Need to build bridge to connect tax authorities
  with taxpayers
• The latter being less financially literate and
  lacking resources for bringing in necessary
  expertise
• This therefore calls for more support from tax
  administration authorities to dedicate and pay
  more attention to education to small businesses
  to bring about improved compliance.

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Introduction

• The Lesotho income tax law is founded on the
  premise of voluntary compliance and
  self-assessment for all.
• Lesotho does not have special tax regime for
  SMEs. The country starting to explore options
  feasibility to have one.
• But practice and treatment take cognizance of
  existence of SMEs.
• Lesotho introduced Self-assessment legislation in
  1993
• But implementation only in 2004 after the
  establishment of the Lesotho Revenue Authority

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Introduction..

• Implementation done after soliciting views from
  stakeholders and taxpayers and assessing their
  readiness
• As program rollover, Initial focus was on
  widening tax net and bringing as much as
  possible taxpayers outside net
• Now focus is changing more efforts and
  attention on enhancing voluntary compliance
  (through education) and creation of fair and
  effective revenue environment - LRA corporate
  objectives.

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Lessons About Design of Taxpayer Education

• Simplified laws important but should not be taken
  as substitutes for meeting small taxpayers
  education needs. Lesotho introducing practice
  notes
• Education programs to be based on direct and
  indirect inputs from SMEs eg queries raised, T/P
  forums, customer satisfaction surveys, media,
  etc.
• SMEs through their structures want to be partners
  in the education process and not merely
  recipients.
• Education programs should not be subsumed by
  general functions like audit and debt management.
  Taxpayer education should be a prerequisite to
  these traditional functions.
• Educate/support should be priority ---- the rest
  follow

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Lessons About Design of Taxpayer Education

• Need to have single view of T/P LRA changed from
  tax type to functional structure. Taxpayers
  education were initially subsumed in other
  functions audit, Debt. Educations programs
  haphazard and not coordinated
• A wholesale approach (VS phased approach)
  brought more problems.
• Small and Large businesses have different level
  of understanding the former least compliant
  resulting very low rate return filing more
  default assessments.

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Experiences Cooperation with Private Sector

• Local associations and clubs are more effective
  for organising and reaching local SMEs. Lesotho
  problem dealing many chambers of commerce (4)-
  but cooperation very good.
• In Lesotho tax clinics have been well attended
  where associations and private sector are
  stronger.
• The LRA is teaming up with banks, chambers of
  commerce, accounting and auditing bodies and
  educational institutions.
• This has been more successful than the
  doing-it-alone approach.

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Is There a Role for Private Tax Consultants?

• Private sector consultants have a major role to
  play.
• Role should not be any form of damage
  limitation -
• Tax consultants must seek to graduate SMEs from
  ignorant tax evaders to more knowledgeable and
  empowered persons.
• There is a fallacy/myth that empowering SMEs
  ultimately leads to lost business by tax
  consultancy.
• Consultants are to be more active and accessible
  so that they undertake advisory service.

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Is There a Role for Private Tax Consultants?

• Lesotho tax consultancy has not seen significant
  growth and this causes increase requests for
  extension of time to tax lodge returns including
  corporates/large businesses.
• There is need for tax consultants who will meet
  the needs of the SMEs such that they are not
  forced to seek big accounting firms services that
  charge exorbitant fees thereby turning SMEs away.
• In Lesotho there is cooperation with the
  accounting body to ensure that strategies are in
  place to assist SMEs while at the same time
  minimizing the associated costs signed MOU
  with LIA and established structures to
  implements MOU

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Role of Local Tax Offices in Delivering Services

• Lesotho established regional offices- providing
  all service except audit, collection and
  investigations centralized, efforts mobile tax
  education to support regional centres
• Local tax offices are to learn the specific
  circumstances of local business and provide
  feedback to education programs designers, tax
  administration and policy reformers.
• Decentralised tax offices should help in reducing
  compliance costs, streamlining of business
  processes and improving filing rate.

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Role of Local Tax Offices in Delivering Services

• Local offices should represent the interests of
  local business.
• They should also be seen to have the requisite
  mandate and decision making power from
  headquarters to be effective. Lesotho upgraded
  position of head of regional centre to Manager
  level

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Ensuring That Education Program Reaches Small
Business in the Informal Economy

• Small businesses in the informal economy are also
  intermediaries .
• There is therefore, need to target their formal
  business contacts and transaction partners to
  enlist their (small business) support.
• Taxi operators, for example, can be targeted
  through filling stations operators and more
  formally established authorities.
• Target various informal associations In Lesotho
  strategy to target more common ones - stockvels,
  Theko Mmoho
• Partnering with Ministries of Trade, Local
  Government, City Council

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Effective Ways to Reach Small Taxpayers with
Service

• Tax administration to be more visible and easily
  accessible
• Public relations initiatives and drives need to
  be enhanced.
• SMEs are more approachable if they know what is
  taking place within the tax administration.
• Lately in Lesotho there is positive change in
  pubic perception of the revenue authority due to
  increased PR.
• Taxpayer education should be integrated with
  other needs, eg, need for banking services,
  licensing requirements.
• Forge links with other service
  providers..

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Measuring the Effectiveness of Service

• Customer satisfaction surveys (CSS) that are
  professionally and independently conducted are
  important
• In the design of a CSS feedback should be
  guaranteed in advance.
• LRA carries CSSs every three years and feedback
  of each provided to all internal (staff) and
  external stakeholders (stakeholders and
  taxpayers).
• Increased interactions with taxpayers and
  representatives. Lesotho signs MOUs with
  different sectors.
• Monitoring of local media for reduced talk about
  the tax administration is important.

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Challenges Ahead

• Forging links with relevant stakeholders
• defining clear areas of cooperation without
  compromising statutory mandate of the tax
  administration
• Outsourcing education training services
• which functions/areas, can you outsource
  education? Tax audits? Collection?
  Investigations?
• Regulating requirements for tax
  agents/consultants
• should we amend and include provisions to
  regulate tax agents, what do we stand to gain
  or loose?

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• The End
• Thank You