26 October 2018

Namibia: EU to Delist Namibia As a Tax Haven

THE European Union has decided to remove Namibia from the list of 17 countries regarded as tax havens due to lax practices and regulations on tax governance.

Namibia was blacklisted in December last year, and is currently one of the six territories countries which are still blacklisted, while the other 11 have since been removed.

The other territories which are currently on the EU blacklist are Trinidad, US Virgin Islands, Tobago, Guam and Samoa.

The Pacific island of Palau was the latest to be removed from this list that once also included Barbados, South Korea, Macau, Mongolia, Panama, and the United Arab Emirates, among others.

Although both finance minister Calle Schlettwein and EU ambassador to Namibia Jana Hybaskova could not comment on the delisting earlier this week, The Namibian was informed by a well-placed source at the finance ministry that the political dialogue has been fruitful after recommendations were made to have Namibia delisted.

However, this all depends on the EU's council meeting taking place on 12 November.

The countries were blacklisted for having lax laws and practices that allowed them to be used as tax havens. This theory was, however, questioned as some countries such as Ireland, Malta and Luxembourg which are located within the EU's backyard were not blacklisted.

Reuters, however, recently reported that the EU is considering screening its own members to see which ones should be blacklisted as tax havens.

Namibia has had to in the meantime enforce some tax reforms in a bid to comply with EU regulations on tax, something which Schlettwein had spoken out against, stressing that Namibia is a sovereign country.

Despite this, Namibia did away with its preferential treatment for manufacturers by repealing the Export Processing Zone (EPZ) Act and tax incentives for manufacturers.

Schlettwein said the fact that the EPZ allows exports outside the Southern African Customs Union to be tax-free, and manufacturers get to pay 18% tax instead of the 32% tax paid by everyone else, was seen as a preferential tax regime.

The EPZ policy has also been viewed as the main reason why the country has been losing potential tax revenue, and that it was only benefiting the extractive industry.

Economics lecturer Omu Kakujaha-Matundu said it would reflect well for Namibia's overall reputation for investors should the country be delisted as a tax haven.

The economist expressed doubt that Namibia could be blacklisted again, saying loopholes are being closed, such as the EPZ incentive that only benefited investors and not Namibians.

"It was an incentive that was heavily exploited by investors, especially within the mining industry, so it is good we are doing away with it," said Kakujaha-Matundu.

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