The tax reform started in 2011 and with great commitment from the Executive, several diplomas were published in the form of General Laws or Codes in 2014, culminating on October 1, 2019 with the entry into force of the Value Added Tax (IVA), and for this there was the publication of other complementary diplomas for the success of this Tax Reform.
As a manager of training and as a professional for 30 years and an economist by further training, I am a citizen and tax inspector in favor of VAT, and I believe that this tax is fairer than the Consumption Tax. I must say that, due to its identity, it is a tax that needs other fiscal, budgetary and social measures in parallel to mitigate the impacts when the economies are not there or lately prepare, from the outset, by the mentality of economic agents. It is an indirect consumption tax and therefore it is an allegedly unfair tax, as the VAT rate is equal for rich and poor. However, the myths persist even after two (2) years of implementation of this tax in the Republic of Angola.
1. Charge the poorest
With the tax reform and the implementation of this tax, the goods most consumed by the poorest and today most taxed are relieved of taxation with the reform, while services, which are more consumed by the richest, but taxed little, would be taxed more. Goods for 2 years that inflation above 20% in recent years is not the cause of this tax. The causes are the lack of import of goods, the importation of inflated goods abroad, reduction of liquidity in the economy, Covid 19, the State’s inability to invest due to excessive levels of Public Debt, among many other causes.
From the functioning of the tax in its General Regime, it is inferred that it is a tax that reduces the burden on all economic agents.
On the other hand, the great advantage of the tax is the internal organization of companies, which is essential for companies to be managed and with good practice procedures. For example, in document management, in the validation of accounting documents, in the correct and timely filling out of tax returns, in the assessment of suppliers and customers to find out if they are in compliance with the tax and commercial benefits of their VAT regimes.
In addition, several public institutions can cross-check data, such as the Land Registry Offices, Automobile, National Institute of Social Security, General Tax Administration (AGT), etc. Companies must understand that digitization and processes are IT and quick to respond. Either the companies are preparing themselves, or they will be in situations beyond the law. The costs with management software or a block of invoices, both licensed by AGT, is another point of complaint. Companies must “mind” that these management and financial management tools are part of good management and that there are prices for all exchanges.
2. VAT rate is high
The rate for products of mass consumption and that the population consumes, the VAT rate is either exempt or 5%. For other goods and services, the VAT rate is 14%, and for companies in the General Regime, the tax is neutral among economic agents.
For entities that are not in the General Regime, invoices are issued without VAT, as they are in the Exclusion Regime.
3. Impact on online transactions
VAT has an indiscriminate effect on the act of consumption. The obligation of local registration of foreign suppliers, the system of digital and automatic credit settlements and cash compensation to the exporter are mechanisms foreseen in the proposals that increase their effectiveness.
The tax is levied by the Regime that each company, and some criteria for knowing or belonging to one of the existing VAT regimes in 2022, are their annual income from the previous year and the economic activity.
4. Implementing the reform in the middle of an economic crisis makes the situation worse for companies
Being a neutral modification that equalizes the game rules for all players and does not raise the total tax burden. VAT does not raise the cost of goods, because it applies the tax on value added that economic agent A passes on to economic agent B when there is a transaction of goods and services.
5. VAT adds to the accountant cost
Companies that don’t have an accountant, a financial one is a “mirage” of a company. Whether in-house or through a company specialized in financial services, it is highly mandatory to have this type of professional and it goes far beyond accounting to pay taxes.
VAT is a daily and monthly tax. Having a certified accountant to close the accounts next year is the way to, sooner or later, close the business.