Namibia: Delloite Proposes Corporate Tax Cut to 20 Percent

ACCOUNTING firm Delloite Namibia has proposed, among other tax items, the reduction of corporate tax to 22% from the current 32% to keep the economy running and to avoid retrenchments as much as possible.

The company said this in a comprehensive proposal write-up titled, 'Covid-19 pandemic: Tax Relief Measures We Hope To See', released over the weekend.

According to Delloite, Namibia is already a vulnerable economy and keeping it stable amid the pandemic is a mammoth, but urgent and necessary task.

Delloite is proposing that the Ministry of Finance considers tax-related measures, such as a reduction in the non-mining tax rate to 22%, non-payment of pay-as-you-earn (PAYE), social security contributions and the Vocational Education and Training (VET) levy for three months, changes to individual tax rates, the temporary removal of value-added tax (VAT) refund verification audit requirement, as well as the extension of the due date for the submission of tax returns.

Other submissions also include the zero-rating [for VAT purposes] of materials, equipment and services and the exemption of import duty on imported materials and equipment relating to the fight against Covid-19.

The firm is additionally proposing the expansion and extension of the tax incentive programme, another tax incentive for the setting up of infrastructure and equipment related to the fight against Covid-19 as well as a tax exemption on the manufacturing of materials related to the fight against the virus.

In substantiating the above proposals, the firm believes that coordinated policies and financing of the economy can help cushion the negative impact of the virus.

CORPORATE TAX

Due to the slowdown in economic activities, many companies are expected to have reduced taxable income for this year and to elevate their negative cash flows and quicken recovery, Delloite is proposing that the non-mining tax rate be changed to 22%.

Also, the firm is suggesting that to discourage the outflow of profits, a temporary withholding tax on local dividends should be considered and an increase of the withholding tax rate on non-residents.

NO PAYE, SSC, VET LEVY

Delloite said to assist employers with constrained cash flows, as a result of the slowdown in economic activities, especially those that wish to retain employees that cannot 'work from home', employers could be granted a three- to six-month tax holiday relating to PAYE, Social Security Commission (SSC) contributions and the VET levy.

DONATIONS

To encourage and incentivise everyone to join the fight against the Covid-19 pandemic, Delloite is proposing that businesses and individuals donating infrastructure, equipment and material aimed at the prevention, combating, treatment and management of Covid-19 should be allowed a tax deduction in their income tax returns for such donations and contributions.

They are also suggesting that companies who set up infrastructure or buy equipment to fight the pandemic be granted a 100% income tax deduction of the cost of such infrastructure or equipment in the year of acquisition.

EXTENDED DUE DATES

Delloite is also suggesting that all tax returns due after 27 March 2020 and before 30 April 2020 be extended until 31 May 2020 and further extension should the lockdown continue.

Also, they are asking for the cancellation of penalties to be extended to interest and the due date to be pushed to 31 December 2020.

IMPORTS

On imports, Delloite is suggesting that the import of all materials and equipment required for the combating, prevention, treatment and management of Covid-19 should be exempted from import duty and import VAT as well as the zero-rating [for VAT purposes] of all materials and equipment required for the combating, prevention, treatment and management of Covid-19.

This would make it affordable to everyone, the firm said.

LOWER RATES

To assist employees that may earn less due to reduced working hours, Delloite is suggesting that the government exempt individuals who fall under the 18% and 25% tax brackets for the 2021 tax year and the other brackets should remain as is.

"The absence of relief measures for taxpayers will further strain cash flow, forcing businesses to close their doors and let go of employees. That is a situation that Namibia cannot afford," Delloite warned.

At a media briefing held last week, finance minister Ipumbu Shiimi said they were waiting on the industry to propose the help they need from the government, which they were to study and revert to industry. This, he said, is yet to be done.

Most of the items Delloite has listed are already provided by the tax codes and would just need the finance minister to inform the public on how they could tap into such, but the finance ministry, as some analysts observed, does not seem to recognise the need for prompt action and is rather moving at a snail's pace.

Email: [email protected]

Twitter: @Lasarus_A

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