The new VAT debt management plan was endorsed in late 2014 and implemented in early 2015.
This sees the VAT Office being equipped with a range of avenues to assist and thus work together with businesses who are trying to comply to settle all outstanding VAT issues and further assist them to continue to comply with their tax obligations.
Methods include, but are not limited to:
- Having an agreement (deduction notice) with business and a business debtor for direct payments or percentage of payments due to be paid directly to the VAT Office;
- Assessing business financial position to determine whether both parties could engage in a payment plan;
- Assessing business financials, history and hardship to determine whether penalties charged could be waived in part or in full to mitigate difficulty of payment.
How the VAT Office could assist businesses in debt to settle their debts through these avenues?
Deduction notice
Section 33(1) of the VAT Act No.12 of 1998 [CAP 247] (the Act) gives the Director of Customs and Inland Revenue the power to serve a notice of deduction to any person (business debtor) to deduct from any amount payable by that person to the business such sum as ay be specified in the notice (whether in one sum or by installments).
The Director through the VAT Office has decided that this power to deduct payments due is open for dialogue and the VAT Office is encouraging businesses to make effort and come forward. Through this approached, the VAT Office will take the lead role to negotiate the deductable amount and prepare all legal documents to get the payments due. Several businesses have approached the VAT Office to assist in this settlement method and it has proved to be a very vital tool to help businesses settle their tax liabilities.
Payment plan
Payment plan or arrangement is an option available to assist businesses to settle their tax debt. This is the most common tool known to the business community and it is used worldwide by all tax administration.
The VAT Office has a payment plan task flow charter which sets out all the require check and criteria’s for a business to be engaged in a plan. This means that all requests for a payment plan will be scrutinized via the charter and successful applicants will be advised to enter into a payment plan.
According to the charter, checks will be made on the history of the entity, the business financial position will be determined before the possible installment amount will be decided. This exercise will be carried by the VAT Officers provided that all required documents and information is provided. Accordingly, all payment plans should be not more than six months. However, depending on the circumstances and on a case by case basis,
arrangement could be more than six month period.
Waiving of penalties
The Director of Customs and Inland Revenue under section 44 of the Act, has the power to mitigate by remitting in whole or in part any additional tax, or interest of penalties which may be assessed under this Act.
The VAT Office after consulting some staff and external organization have pointed out that the compounding nature of penalties and interest can act as a disincentive to pay current or future taxes if the tax debtor believes that they cannot ever catch up.
The VAT Office is aware of this issue and is planning to better understand the point at which penalties and interest influenced compliance so it is inviting businesses to come forward and make suggestion. The VAT Office is open to discussions around debts and the director through the VAT Office can exercise its powers to determine the penalties and interest position of the business.
Inland Revenue’s new compliance strategy is based on voluntary compliance. The VAT Office is trying to make it easy for people/businesses, by informing taxpayers of their obligations, and providing a mix of services to support payment. When a taxpayer does not comply, the VAT Office can encourage and enforce compliance by a range of measures.
At this stage, the VAT Office is encouraging all taxpayers with outstanding tax issues to come forward and work together with the VAT Office to get their tax affairs up to date whist the VAT Office continues to devise new tax debt settlement methods to assist.
Introduction of any new debt settlement methods will require a balancing of cost and benefits to both the tax office and taxpayer, including protection of the integrity of both parties.
However, for businesses who decided not to comply, the VAT Office will have no other option but to refer them to the return and debt collection team and/or Inland Revenue investigator. Both teams will pursue recovery of outstanding tax returns and debts through our return and debt recovery process and may seek legal remedies through the court.
“Please come forward so we can work together to get your outstanding tax issues sorted”.
For more information on any VAT issues, please contact the VAT Office by phone: 00(678) 24573 and 00(678) 37517 (Santo), visit us at our Office in Carnot Street, Port Vila or email us at
For past articles please visit our website: http://customsinlandrevenue.gov.vu
