Tax proposals in previous budget statements

Tax proposals in previous budget statementsPwC Namibia reflects Finance minister Iipumbu Shiimi will table the 2021/22 Budget in Parliament on Wednesday. Chantell Husselmann - Given the challenges of Covid-19, the finance minister Iipumbu Shiimi did not announce any new tax proposals within the 2020/21 budget statement. This notwithstanding, previously announced proposals in the 2019/20 budget statement which were under review and gained a lot of focus within the economy included the following:

? Phasing out the current tax incentive for manufacturers and exporters of manufactured goods.

? Repealing the Export Processing Zone (EPZ) and introducing the Special Economic Zones, with a sunset clause for current operators with the EPZ status.

? Increase the tax deductibility of retirement fund contributions from the current N$40 000 per annum to 27.5% of income with a maximum of N$150 000.

? Introduce value-added tax (VAT) on income earned by listed asset managers.

? Introduce VAT on proceeds of the sale of shares or membership in a company owning commercial immovable property.

? Remove VAT zero-rating on sugar.

? Disallow deductibility of royalties for non-diamond mining entities.

? Revising the export levy for forestry products from a levy in percentage rates to an amount in Namibia dollar per kilogram to prevent undervaluation of forestry products such as timber.

? Expanding coverage of export levy to include other specific agricultural, forestry, game products and other mining products currently not covered by the export levy regime.

? Abolishment of certain duties and levies in terms of the Customs and Excise Act, 1998 which should have a lowering effect of the kerosene/paraffin prices in Namibia.

Of the above proposals, the following were enacted:

? Gazette 7431, which came into effect on 31 December 2020, repealed certain existing preferential treatments granted in respect of registered manufacturers and also includes the insertion of Section 101A “Repeal of certain provisions of Export Processing Zone Act, 1995”. Most importantly, this Act includes the repealing of the export allowance under Section 17C of the Namibian Income Tax Act.

? Schedule 3 to the Export Levy Act was amended by Gazette No. 7080 on 20 December 2019 to include a detailed list of forestry products subject to an export levy with a rate of 15%. The 15% export levy rate has now been abolished and replaced with a rate of Two (2) NAD based on the mass in kilogram of wood and timber products exported from Namibia in terms of Gazette No. 7401 published on 30 November 2020.

? The fuel levy of 120 c/liter on kerosene has been abolished with Gazette No. 7239 dated 12 June 2020. The price of kerosene (illuminating paraffin) subsequently reduced to assist many households.

The following was withdrawn:

? The proposed disallowance of royalties by mining companies for tax purposes was withdrawn by the Minister of Finance on 27 May 2020 to stimulate the exploration, production and re-investment in the mining sector.

Although the above sheds a mere spotlight on the movements within the tax proposal space, more needs to be done to ensure the pre-Covid growth trajectory of the economy is achieved.

We look forward to the finance minister Shiimi pronouncing himself on this aspect in the coming budget speech on Wednesday.