Namibia: Government to Fast-Track Tax Relief Measures

Deputy finance minister Maureen Hinda-Mbuende says the implementation of measures to provide tax relief to taxpayers will be fast-tracked.

She made these remarks on Tuesday in the National Assembly while delivering her motivation statement for the tabling of the income tax amendment bill.

According to her, the amendments are necessary to provide a measure of relief to taxpayers and further enhance the efficiency and fairness of the tax system.

Hinda-Mbuende stated the amendment bill proposes some relief to taxpayers, such as a deductible amount on the pension fund and educational policy contributions that will be increased from the limit of N$40 000 to N$150 000. “This will motivate taxpayers to save for the education of the Namibian child. Similarly, the increase in deductibility on pension fund contributions is aimed at encouraging taxpayers to save for retirement,” the deputy minister pointed out. The bill further proposes to align the allocation of payments to tax, interest and penalties.

Hinda-Mbuende stressed the proposal will create effectiveness in allocating payments towards the settlement of outstanding amounts.

“In terms of the current practice, if the taxpayer makes a payment on an outstanding tax debt, the payment is first allocated to the capital tax amount – and if the payment exceeds the tax amount, the difference is allocated to the penalty and then any remaining amount is allocated to interest,” she explained. Deputy minister explained the practice resulted in an unfair tax burden to the taxpayer because the interest portion is always the final item to be allocated a payment, and interest accumulates on a monthly basis; thus, certain taxpayers find it difficult to settle their tax debts.

The bill further introduces certain provisions aimed at curtailing the challenge of base erosion and profit-shifting by multinational enterprises.

The focus is to amend the Income Tax Act of 1981 to insert additional circumstances under which amounts are deemed to have accrued from a source within Namibia, to clarify the deduction of contributions made to company-owned policies, as well as to increase tax deductibility of the retirement fund and education policy contributions. Its aim is to further provide for the furnishing or serving of a tax return or notice of assessment in an electronic format, to amend the rules relating to the allocation of tax payments, to provide for thin capitalisation rules and to provide for incidental matters.

Tabling the 2022/23 mid-term budget review in the National Assembly last month, finance minister Iipumbu Shiimi said in the area of tax policy and tax administration reforms, government is focused on the implementation of measures that could potentially provide some relief to taxpayers in the near to medium-term.

Some of the resolutions he pointed out include that the ministry will assess the consideration to increase the threshold for income tax on individuals from the current N$50 000 to N$100 000 to grant relief to low-income earners.

Shiimi stated the Namibia Revenue Agency (NamRA) has crafted a tax compliance and enforcement strategy, which will be rolled out over the medium-term expenditure framework (MTEF) to combat tax evasion.

“The Value Added Tax Amendment Bill is also before the legal drafters before the tabling in the National Assembly during this financial year. The bill incorporates zero-rating the supply of sanitary pads, among others. Going forward, the previously announced tax proposals and considerations will be revisited once the economy has sufficiently recovered, and corporate and individual incomes have adequately stabilised,” said Shiimi. NamRA, through the electronic tax relief programme that ended on 31 January 2022, waived a total amount of over N$11 million in penalties. NamRA commissioner Sam Shivute stated in April this year the total number of taxpayers who participated in the programme stood at 47 493, while an amount of N$1 320 528 999 was collected and paid into the state account. As of 30 September 2021, Namibian taxpayers owed an astounding N$36 billion in penalties to NamRA. About 117 600 taxpayers were penalised for late submission and payments. Shivute continued: “60% of interest and 100% of the penalties will be waived if a taxpayer with tax arrears registers on the ITAS portal and pays off the outstanding capital amount during the remaining six months, effective 1 December 2022 to 30 May 2023.

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