Fraud probe launched into N$6bn VAT refunds

By Patience Nyangove

THE cash-strapped Ministry of Fi­nance has launched a forensic in­vestigation into allegations that val­ue-added tax (VAT) refund claims, which amount to about N$6 billion a year, are be­ing used as lucrative cash cow by struggling tenderpreneurs, following the drying up of State tenders, Confidente has learnt.
It has emerged that some tenderpreneurs are claiming as much as N$5 million or more a year in VAT refunds, while using a string of different briefcase companies.
Minister of Finance, Calle Schlettwein, confirmed last week that the ministry had detected “quite a number” of fictitious claims for VAT refunds, which are being investigated.
“We are conducting forensic investiga­tions into some of the claims, after we es­tablished that quite a number of the VAT claims were fraudulent,” he said.
Confidente is reliably informed that annually the Department of Inland Revenue collects an aver­age of N$16 billion from VAT, and about N$6 billion of this amount is reimbursed to businesses as VAT refunds.
Inquiries by Confidente have also established that a number of the tenderpreneurs are operating a string of briefcase companies, which have VAT vendor numbers and are therefore eligible to apply for refunds.
Confidente understands that the fraudsters submit fictitious invoices for VAT refunds, where they purport to have imported or acquired goods locally, when in actual fact they never purchased any goods.
It has also been established that their modus operandi also includes submitting fictitious in­voices to the Ministry of Finance, which show that they imported vehicles for resale in the country.
One case, which has made its way to the courts recently involves 24-year-old Kotje Ngaujake, who last month made a brief appear­ance in the Windhoek Magistrate’s Court over alleged VAT fraud, in­volving over N$500 000.
Ngaujake was arrested on 15 June, after a joint investigation by the country’s intelligence service and the Finance Ministry, into the alleged defrauding of Inland Rev­enue.
He faces three charges of fraud, forgery and uttering.
Preliminary investigations re­veal that Ngaujake misled the Receiver of Revenue about being a registered taxpayer, before al­legedly submit¬ting three false tax refund claims, between 2016 and 2017, relating to the import­ing of vehicles.
Court documents in Confiden­te’s possession show that Ngaujake al¬legedly cheated tax authorities out of a total N$515 411.60 over a pe¬riod of seven months. He allegedly received N$47 378.87 between Sep¬tember and Novem­ber 2016, N$52 198.98 between December 2016 and January 2017 and N$415 833.75 between Feb­ruary 2017 and March 2017.
Confidente also understands that some of the tenderpreneurs at times submit invoices where they rake in an average of N$2 million in VAT refunds, in one go, from the State.
Another modus operandi of the culprits is to register two or more briefcase companies under dif­ferent owners, where one, for in­stance, is listed as being a supplier of construction materials, like ce­ment, while the other is purported to be a buyer of these materials.
“These tenderpreneurs will then submit a VAT refund claim, purporting that Company A that is listed as a supplier of cement sold, for example, 100 bags of ce­ment to Company B. Company B then purportedly used the bags of cement to construct houses, which they know fall under the category that is not taxed, so the tenderpreneur submits fictitious claims for a VAT refund for the 100 bags of cement, he reported­ly purchased from Company A,” a Finance Ministry source revealed this week.
“When officials from the min­istry does random background checks, that’s when they realise that Company A and B are both owned by one person, and that they only exist on paper. When a company says it bought or sold 100 bags of cement, then you would expect it to have a ware­house or a forklift at the very least, but they do not own anything at all.
“All these culprits do is to forge invoices, as well as understate their VAT output, to milk gov­ernment,” the impeccable source added.
Investigations have also estab­lished that some of the fraudsters connive with officials in the Min­istry of Finance, to defraud the State.
“Some officials have since been exposed and dismissed from the ministry for misconduct involv­ing fraudulent VAT claims,” the source added.