Trustco loses High Court battle against Namibia Revenue Agency over tax dispute

Trustco Group Holdings has lost a High Court battle against the Namibia Revenue Agency (Namra).

In 2022 Namra froze bank accounts of 42 entities linked to Trustco due to more than N$200 million Trustco owed Namra.

Trustco challenged this decision in court. In its application, Trustco requested the court to declare that sections of the Income Tax Act and the Value-Added Tax Act, which allow the tax authorities to declare an entity like a bank an agent for the collection of tax from funds held by it, are unconstitutional, and to refer those sections to the parliament to be rectified within a period of 12 months.

However, the High Court dismissed Trustco’s application with costs last week.

“The applicants’ challenge to declare 91 of the Income Tax Act 24 of 1981 and section 36 of the Value Added Act 10 of 2000 unconstitutional is dismissed,” reads part of the court judgement.

The High Court also instructed Trustco to pay Namra’s legal costs.

At the heart of the dispute, Trustco was reportedly owed approximately N$136 million in value added tax (VAT) credits by Namra. However, this position reversed during 2020/2021 when Namra raised assessments for various tax liabilities, including income tax, VAT, and withholding tax, amounting to hundreds of millions.

According to an affidavit filed by Trustco Group Holdings’ executive financial director, Floors Abrahams, at the time, he said the decisions to demand that companies in the group should immediately pay their taxes and interest on their tax arrears were “administratively unfair, unreasonable, […] irrational, arbitrary” and also in violation of the Constitution.

He also said Trustco is “gravely concerned” about the timing of the decisions, which were taken at a time when the Trustco group and its Trustco Bank were embroiled in a dispute with the Bank of Namibia.

Namra informed Trustco in a letter on 3 October 2022 that the group owed N$201.7 million in unpaid taxes, and also N$103.8 million in interest on those taxes.

At the time, Namra requested that companies in the Trustco group pay 30% of the capital amount owed to Namra by 10 October 2022.

In a follow-up letter on 20 October 2022, Namra demanded that the Trustco companies settle their outstanding tax bills, including penalties and interest, immediately.

Abrahams said Trustco is disputing Namra’s calculation of the taxes owed by companies in the group.

According to Trustco, if Namra had correctly set off tax credits owed to the Trustco group, the group would owe Namra only about N$7.8 million.

He further said, in line with its calculation of its tax arrears, Trustco paid an amount of nearly N$2.7 million – 30% of the taxes Trustco says it owes – to Namra on 11 October 2022.

From March 2020 to October that year, Trustco had paid nearly N$63.4 million to Namra, Abrahams said.

He also said Trustco had an agreement with Namra that the group’s outstanding tax liabilities had to be paid only by the end of May 2023, and that Namra made an about-turn on this agreement without giving Trustco an opportunity to be heard.

“When Namra owed Trustco money, it did not repay Trustco, but was willing to set future taxes off against the refund that was due to Trustco,” Abrahams said. “But now, when the position has changed, it immediately wants to recover payment in full from Trustco.”

Namra’s decisions “demonstrate a total disregard for the financial and economic impact of such a directive on the ongoing operations of the Trustco group of companies, and constitute irrational, arbitrary and malicious decision-making,” Abrahams claimed.

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