Shedding light on controversial general sales tax law [Archives:2004/701/Business & Economy]

January 8 2004

Mahyoub Al-Kamaly
The Yemeni president Ali Abdulla Saleh has lately issued a decree on a law permitting the beginning of putting into force the general tax on sales on the first of July 2004.
It is the law that has aroused controversy among the productive, industrial and agricultural circles and opposition warnings about it have gone as far as saying that the law was dealing a mortal blow to the consumer.
Some have in fact defended the law No.19 for the year 2001 under justification that it unifies taxes and creates taxation justice, contains a list of names of commodities exempted from taxation, most of which are related to consumption.
It is because of the vital importance of the law, the Yemen Times is exclusively trying in this article to review the most significant aspects and features of the law as levying the tax on sales of commodities and services at the time of selling and importing is calculated by 10% of the gross value of the goods, as stipulated in the law. One of the law articles defined the volume of sums due to be taxed on as not lower than YR 50 million for goods subjected to the tax and YR 40 million for services.
The law stipulated that article 8 would be the value that would be taken as criterion for the tax on commodities and services is the actual value fixed on the selling bill which represents selling price of the commodity or the price actually paid in return for the service. And in case the taxpayer person sells the commodity that is subjected to the tax via middle channels the value for connecting the tax would be the real value fixed on the selling bill in no less than the actual price of the commodity in the market.
Article 9 of the law determines the value of imported commodities subject to the tax through middle channels, which are the customs duties imposed on according to the customs law added to them the other duties and the value of services would be defined to the value stated in the contracts or the invoices or payment vouchers. The article 11 has warned that the taxpayer must not issue but one selling bill for each commodity selling operation or providing services subject to taxation. The article 14 of the law has explained conditions of discounts on the inputs tax for the taxpayer when calculating the tax due to pay and it would be deducted from the overall tax payable on value of his sales of commodities and services.
The law has also contained provisions defining conditions of deduction on inputs tax as stipulated in article 16 in that the tax is returned pursuant to the terms and situations defined by the executive regulation of the law at a time not exceeding one month starting from the date of presenting the request of returning, and that is in cases as follows:
– the tax already levied on commodities exported as they were or used in production of other goods and them exported,
– the tax that was paid from inputs of a commodity exempted from taxes,
– the tax that has been collected by mistake and this could be retrieved according to a written request presented by the concerned person.
Article 17 of the law gives right to the authority to modify the value subjected to the tax if it is proved that it its value of sales of the taxpayer person's commodities or services different of what has been reported by him about any taxation period. The law has given the taxation authority the right to estimate the amount of the tax if the taxpayer did not present the stipulated legal statement and also if any taxpayer person has added the tax to his sales or the services he is providing.

Objection, challenges and settlement
According to article 19 the taxpayer person can forward his objection to the authority on a decision of amending the acknowledgement or estimation of the tax within thirty days of from the date of notification and the authority has to decide it within thirty days from the date of objection. If the objection was rejected and was not decided the concerned person has the right to report to the challenges committee within the following thirty days. But the taxation authority's final estimation or changing is not challengeable, according to the article 20 of the law. And if the taxpayer person objected to that it would be referred to the settlement committee. These committees are set up according to the law in the capital secretariat and governorates to discuss objection aspects with the taxpayer to be settled.

The eighth chapter of the law deals with means of notification among that the way of conveying a writ to inform the taxpayer on all stipulated procedural actions by administrative notification at the establishment headquarters or residence of the taxpayer or via registered post to the most recent address. In the article 29 there are details on how to respond if the taxpayer refused to receive the notification or closure of his installation and absence of its owner and also it was not possible to inform the taxpayer on the writ by the above means. Such cases are proved by writing a statement by one of the authority's employees and endorsed by the residential quarter chief or the police station and to be put on the notice board at the authority offices. The law also tackles the question of how to collect the sales tax and payable fines. The collection is done according to statements presented to the authority about commodities and services included in taxation and if it exceeds the overall amount of money fixed as incomes tax the surplus difference must be paid.
Article 33 stipulates that in case the taxpayer failed to pay his dues in time of statement in the fixed period he would bear a delay fine by 2% of the unpaid tax value for each month or part of it delay in not exceeding 20% of the value of payable tax.
The law has given head of the taxation authority or the one he deputize the right to ask general prosecution to issue a provisional seizure order concerning the taxpayer properties if it has been discovered that the tax was exposed to loss, executive seizure whenever the tax and other payable sums of money have become conclusive.

Types of exemptions
The tenth chapter of the law explains the types and cases of exemptions that are special ones fixed in table No.1, the main of which are corn, flour, bread, dairies, meats, fish, vegetables, fruits, tomatoes , honey, coffee, dates, ea, child food, soap, medicines and medical supplies, ambulance cars, books, tools spare parts, construction materials, and fodders, in addition to hotel services, maintenance, insurance, education services and transport and water and others.
Other exemptions by other laws related to provisions of taxes imposed according to agreements concluded between the government and foreign countries, international and regional organisations, or petroleum and mining agreements approved by law according to constitutional procedures.

Tax evasion
The law punishes acts of tax evasion by imposing fine penalty no lass than 5000 rials and not exceeding 50 thousand rials for on anyone who has presented incorrect statements on his sales of services or commodities or upon the appearance of increase or shortage in the goods warehoused in free zones and markets exceeding 5% and not exceeding 10%, or on anyone who fails to inform the tax authority on changing registration statements or total or partial stop of his activity. In the article 46 the law imposes severer penalties ranging between 50 to 250 thousand rials in case of tax evasion or beginning to do so and the fine would be doubled and could be imprisoned for a term no les than three months and not exceeding 6 months.
The law also tackles the way of monitoring and inspection of bills and records by employees of the tax authority. But the law keeps right of the taxpayer about the secrecy of information regarding vouchers, information, records and ways of production and manufacturing. The law has given the authority officials the right to inspection during the duty hours for seeing the records at places of administration, production and selling.
Those were the most important features of the general sales law that is scheduled to be implemented next July and has already aroused wide-scale controversy among various circles of the society.