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Wednesday, December 20, 2006 - Web posted at 7:23:18 GMT Finance loses out in N$50 m tax dispute Werner MengesTHE Minister of Finance has lost a high-stakes Supreme Court appeal over a N$50 million tax bill dispute with the De Beers Marine diamond mining company. |
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In a judgement given in the Supreme Court last Friday, the court upheld a ruling of the Special Tax Court in which Acting Judge John Manyarara decided that the Receiver of Revenue had wrongly slapped De Beers Marine with a tax assessment that would have forced the company to pay some N$50 million more into the State treasury than the law actually required. With the Supreme Court judgement, which was written by Acting Judge of Appeal Johan Strydom, a disagreement between the Finance Ministry and De Beers Marine that goes back some six years should now be laid to rest. Judge of Appeal Gerhard Maritz and Acting Judge of Appeal Fred Chomba agreed with Acting Judge of Appeal Strydom's judgement. The dispute that the Finance Minister and De Beers Marine took all the way to the Supreme Court started with the sale of five ships by the company at the end of 2000. Four of those vessels were sold to a Namibian-registered sister company, De Beers Marine Namibia, which then continued to deliver the marine diamond prospecting and mining services to the partly State-owned Namdeb diamond company that De Beers Marine had previously been delivering to Namdeb. In the tax year that ended on December 31 2000, De Beers Marine declared a taxable income of N$636,8 million according to the evidence that was placed before the Special Tax Court, Acting Judge of Appeal Strydom recounted in his judgement. The company's taxable income from the sale of the five ships was a little over N$250,6 million. The issue at the heart of the disagreement between the Finance Minister and Receiver of Revenue on one side and De Beers Marine on the other was whether that income from the sale of the five vessels should be regarded as income from mining of diamonds or from services rendered in connection with diamond mining, or if it was income not directly linked to diamond mining activities. If it was considered as income connected to diamond mining, it would have had to be taxed at a rate of 55 per cent. If not, it would have had to be taxed at a rate of 35 per cent. Between those two tax rates lay a difference amounting to some N$50,1 million. The Receiver of Revenue initially decided to assess the income from the sale of the vessels at a 55 per cent tax rate. De Beers Marine objected against that assessment to the Commissioner for Inland Revenue, but the objection was not allowed. The company then appealed to the Special Tax Court, where Acting Judge Manyarara ruled in its favour. The Minister of Finance then took the matter further on appeal to the Supreme Court, where Acting Judge Manyarara's ruling was upheld. The business of De Beers Marine was to render services in connection with the mining for diamonds, Acting Judge of Appeal Strydom stated as his judgement approached its decisive part. "It was not its business to sell vessels," he remarked. "There was therefore no direct connection between the sale of the vessels and the business of (De Beers Marine)," he added, stating that as a result the Special Tax Court was correct when it decided that the company's income from the sale of the ships had to be taxed at a rate of 35 per cent. A South African tax law expert, Trevor Emslie, SC, represented De Beers Marine in the Supreme Court appeal, which was heard on October 9. Gerson Narib from the Office of the Government Attorney represented the Minister of Finance. |
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