We have entered Budget Season and the Honourable Minister of Finance read the Namibian Budget Speech on the 8th of March 2017 in Parliament. Every year during the Budget Speech tax policy proposals are made.
Incorporating tax policy proposals into legislation provides the following benefits:
Additional or improved revenue collection opportunities for the fiscus; and
Maybe even more important, clarity and policy surety for businesses in the country since they then know what the framework is within which they are doing business.
We took a step back this past week and looked at the Budget Speeches delivered in Namibia from 2013 to 2016. We summarised the tax policy proposals made during these 4 years. We only included a tax policy proposal in the first year that it was mentioned and ignored it if the same proposal was mentioned in a later year again. Our summary then provides for a date on which the proposal was incorporated into legislation in Namibia and thus became effective in Namibia. We do recognise that certain of these proposals made will require various consultations and market analysis before being incorporated into legislation.
The summary above shows that the 2015 calendar year was a busy year for the legal drafters of the Ministry of Finance and the majority of the proposals promulgated took place during 2015.
We do however also note the following:
We note that the amendment to the transfer duty legislation proposed have not yet been incorporated into legislation. We do know that a draft piece of legislation was available at some stage for public comment, but we are not sure what the current status of this piece of legislation is.
We note that the Revenue Agency task team was mentioned and appointed during 2014 and draft legislation was mentioned by the Minister of Finance late last year. This piece of legislation is still being finalised and we hope that this Agency will be incorporated soon.
We note that the export levies proposed and promulgated during 2016 is still not effective and the effective date is still to be announced.
We now turn to the 2017 Budget Speech delivered on the 8th of March 2017. The following matters were left unchanged in the tax proposals:
No changes were proposed to the Value Added Tax rate of 15%;
No changes were proposed to the Corporate Tax Rate of 32%; and
No tax bracket adjustments have been made since 2013. That results in the income tax brackets for individuals and trusts remaining the same since 2013 and these brackets have not been adjusted for the effect of inflation on the taxpayers.
The Honourable Minister of Finance mentioned the following tax proposals in his speech for consideration during the current year, and we quote: “83.
I however wish to propose new tax policy and tax administration reforms as well as completion of some of the major on-going reforms with the objective of deepening and broadening the existing tax base, curbing tax base erosion, profit shifting and tax planning opportunities as well as improving overall efficiency in the tax administration function;
tax proposals for curbing base-eroding tax exemptions and deductions on the Income Tax and VAT will be proposed through a stakeholder consultation process. Examination of the current provisions of the tax code indicate that effective tax rate categories of Company Tax reduces significantly when exemptions and deductions are considered,
similarly, a tax proposal for a Simplified Presumptive Tax on small units will be developed and tabled,
a further increase of the fuel levy administered under the Customs and Excise Act is proposed at rates to be determined during the determination of the taxation proposal,
the provisions of tax on Capital Gains will be expanded to provide for wealth-based taxation on certain categories of capital assets. …
Tax proposals on wealth tax will be developed and further to embody the principles of Solidarity Wealth Tax,
implementation of the Tax Arrear Recovery Incentive Programme will continue across all categories of taxes within the announced calendar,
a phased roll-out of the new Integrated Tax System will commence during year for the full deployment of the system by 2018, and
the transitional modalities for the establishment of a Semi-Autonomous Revenue Agency will commence with the expected tabling of the enabling legislation during this session of Parliament. To provide for the seamless transition process, the expected Day One of the Agency will be 1 April, 2018,
in line with the regulatory determination by the Bank of Namibia to phase out cheque payments, the Receiver of Revenue will cease to accept cheque payments by 30 June 2017.”
Some of the proposals above have been mentioned before and are also included in the summary of the 2013 to 2016 proposals. The main themes from the 2017 proposals can be summarised as follows:
The list of deductions available in the Income Tax Act and the VAT Act will be reviewed; and
Capital Gains Tax elements and Wealth Tax elements will be considered to increase the contribution made by the wealthy.
Given the current economic environment and the need for better revenue collections in order to fund the priorities of Government, we would like to see that these outstanding proposals and new proposals considered for the 2017 Budget Speech, be incorporated into legislation quickly. That would assist businesses in knowing what their responsibilities are.
We would also like to see draft legislation being issued for public comment before it being tabled in parliament.
This will ensure that practical questions and concerns from business and the public can be addressed before the legislation gets promulgated and implemented.
Tax legislation should keep up with the developments of the local and international economic environments. Namibia’s tax legislation have not been keeping up with these changes and developments and serious consideration should be given to updating the scope of our legislative framework.
This will require a faster pace for changes to legislation being drafted, published for public comments and presented for Parliament and National Council oversight. Through this Namibia will be able to ensure that we recover the taxation due and ensure that we have funding available for the priorities of the Nation. We anxiously await the draft legislative proposals and changes.