Govt sued over tax millions

LUXURY retailer Stuttafords is suing the Namibian government for N$3,8 million over what they claim has been a wrong tax assessment in 2004, amid reports that the retailer faces bankruptcy in South Africa.

In June, South African media reported that Stuttafords, a high-end retailer of branded fashion, apparel, footwear, accessories and cosmetics, had been placed in a business rescue wind-down after 61% of independent creditors who are owed a total of R836 million, voted in favour of this process over a liquidation.

Liquidation is the process of bringing business to an end, and distributing its assets to claimants. Once the process is completed, the business is dissolved.

A source in the finance ministry told The Namibian yesterday that while Stuttafords was suing over a 13-year-old ‘incorrect’ tax assessment, the retailer has not submitted tax returns for 2016 to the receiver of revenue.

Finance minister Calle Schlettwein confirmed the case to The Namibian on Tuesday, but declined to give details since the matter is pending in court.

According to court papers seen by The Namibian, Stuttafords Stores Namibia (Pty) Ltd is suing the Commissioner of Inland Revenue, the finance minister, and the attorney general, in the Windhoek High Court for N$3,8 million. The three have given notice that they will defend the legal action against them.

The retailer claims that it incurred losses since 2002, when it commenced business, to 2008. It further claims that it received N$2,6 million from its lessor to fit out its shop in Windhoek.

Stuttafords claims that it submitted income tax returns and financial statements for the year ending 2002, but was only assessed in December 2004, with the Ministry of Finance’s Inland Revenue Department then treating the N$2,6 million tenant allowance spent by the retailer as income instead of capital.

Stuttafords claims it incurred a loss of N$327 000 for the 2002 financial year, and that its assessed loss for 2002 would have been N$3 million had the N$2,6 million been correctly treated as capital rather than income.

The retailer claims that despite the irregularity, the Inland Revenue Department made claims against Stuttafords for an amount of N$835 000 as per the Income Tax Act, including penalties and interest, after the financial year 2009.

On 22 November 2016, Stuttafords said it was reminded by the Inland Revenue Department to pay N$828 000 as income tax, penalties and interest up to that date.

In an affidavit filed in the High Court, commissioner of inland revenue Justus Mafongwe states that it would be fundamentally unfair and prejudicial to allow Stuttafords to challenge administrative decisions made as far back as 2004, without having the opportunity to have a record.

In South Africa, media reports say that Stuttafords has five stores remaining out of nine at the beginning of the winding-down process.

According to the latest figures released by statistician general Alex Shimuafeni, the wholesale and retail sector is one of the sectors which shed jobs in Namibia in 2016, with about 97 000 jobs in the sector in 2014 having decreased to 65 000 in 2016.

The Namibian could not confirm last week’s media reports that the company Diablo Trading Pty has purchased the local unit of Stuttafords, despite all efforts to do so.