Tax dodging firms in trouble

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MASERU — The government is planning a mass deregistration of companies that do not file their annual tax returns, the Lesotho Times can reveal.

The “Day of Reckoning” is yet to be set as the Law Office is still compiling a list of companies that have not submitted their annual tax returns.

The Law Office, an arm of the Attorney General’s office responsible for registering and deregistering of companies and societies among other law duties, has been tasked with ensuring that the companies are deregistered.

The Deputy Registrar General, ’Mampoi Taoana, confirmed that all companies that were registered since 1967 that have not been filing their annual tax returns will be deregistered soon.

Taoana said the companies’ registry system needed to be cleaned of inactive companies ahead of the enactment of a new company law.

“I cannot confirm the date as yet but all I can say is we are going to announce deregistration of culprit companies very soon,” Taoana said.

“The law gives us power to delete any company that does not comply with the Companies Act which requires that companies submit their annual tax returns,” she said.

Taoana said she could not estimate the number of companies that are likely to be deleted from the registry because her office was still in the process of compiling a list of those that have not filed their annual returns.

However, a source working in the Registrar of Companies’ office told this paper that defaulting companies were estimated to be over 10 000.

Some of these companies have never submitted their annual tax returns to the Lesotho Revenue Authority (LRA) ever since their registration, the source said.

They have also not renewed their trade licences with the Ministry of Trade and Industry because they do not have tax clearance certificates issued by the LRA.

“One can safely say these companies are inactive. This is the reason why they do not file their tax returns and why they do not apply for renewal of their licences,” the source said.

“The Registrar of Companies may delete companies from the registry if she has reason to believe that they are not carrying out any business,” she said.

A newly registered company acquires a trading licence only after it has produced a tax clearance certificate from the LRA.

The law regulating income tax requires that companies should file their annual tax returns to the LRA before they can apply for the renewal of their trade licences.

The Ministry of Trade does not issue or renew trade licences unless a company shows it is in full compliance with the income tax law by producing a tax clearance certificate.

Some companies had not submitted their annual tax returns over the past 10 years, Taoana said.

Active companies that have not been filing their tax returns and continue to operate after deregistration will be prosecuted, said a lawyer working with the LRA.

Prosecution of companies that do not pay tax might lead to their closure, the lawyer, who opted to remain anonymous, said.

“Some companies closed shop after we took legal action against them in the past,” he said.

LRA spokesperson, Pheello Mphana, said it is a criminal offence for a company not to file its annual tax return.

“We normally take legal action against companies that do not submit their annual tax clearance as required by law,” Mphana said.

“We take that as a serious criminal offence. Once a company is registered it is a law requirement that it files tax returns.”

He said the LRA however did not have “any intention of closing any company”.

Mphana however said he was not aware of the government’s move to deregister or close companies that do not pay tax.

“I am not in a position to know the government’s plans regarding this issue,” he said.

“But from the side of the LRA, yes we do take legal action against companies that do not pay tax.”

 Finance Minister, Timothy Thahane, said the government was not planning to close active companies that do not pay tax but “pursue them to pay tax as per their obligation”.

“It would be idiotic for us to close companies,” Thahane said.

“We only pursue companies to pay tax as their obligation,” he said.

 Thahane could however not be brought to say whether it was a cabinet decision to deregister inactive companies.

“Registering and deregistering of companies is the duty of the Registrar of Companies and she may deregister companies anytime when she deems fit,” Thahane said.

As a way of monitoring the activities of companies and simplify the process of registering and deregistering of companies, the government is going to move the companies’ registry from the Ministry of Law to the trade ministry’s one stop shop.

The principal secretary for the Ministry of Trade, Teleko Ramots’oari, said the Registrar of Companies has already been told to prepare the registry’s departure from the Ministry of Law.

“We are in the process of bringing the registry of companies to our one-stop shop,” Ramots’oari said.

Taoana said the companies’ registry is by law falling under the ministry of trade and “there is nothing amiss about moving to the trade headquarters”.

“In the olden times, government decided to bring the administration of companies’ registry to the Ministry of Law for convenience,” she said.

“Legally speaking, it is under the Ministry of Trade.”

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