NAMIBIA’S manufacturing companies paid approximately N$500 million corporate tax between 2010 and 2019, and this was only paid by at least 20% of them, said the Ministry of Finance.
They paid this tax over the years they were enjoying tax incentives the government provided under the Income Tax Act.
These tax incentives include additional deductions on the training of employees, transport costs, export expenditure and a lower tax rate of 18%.
This, according to the ministry, still left at least 80% of the companies in a tax loss position between 2010 and 2020.
Late last month, former minister of finance Calle Schlettwein tabled an income tax amendment bill seeking to remove tax incentives given to manufacturing entities.
Motivating the bill, Schlettwein said the manufacturing tax incentive had not achieved the anticipated growth but rather created government revenue loss.
He also said the incentives did not yield the desired outcomes in terms of attracting new investments and creating jobs.
The ministry’s spokesperson, Tonateni Shidhudhu, last week said from 1998 to 2019, the taxman approved and registered 129 companies, as manufacturing entities, for tax purposes.
The finance ministry approved these companies, in concurrence with the minister of industrialisation, trade and SME development. The process was that the finance ministry would receive a recommendation letter from the trade ministry, followed by a physical inspection to assess whether the application meets the requirements per the provisions of the Income Tax Act, Shidhudhu said.
He said in the last 10 years, some of these manufacturing companies paid corporate tax of about N$500 million, adding that this was only paid by some companies.
“Eighty percent of the approved manufacturers under the Income Tax Act are running tax losses due to the generous tax incentive,” he said.
Asked whether the number of applications the ministry was getting from entities seeking to benefit from the manufacturing tax incentives had increased over the years, Shidhudhu said these nose-dived after the announcement that the government was considering discontinuing them.
The bill to-date has received support from the opposition parties in parliament as well as policy review experts.
Some have cited that many deserving entities were never granted the tax incentives, but were rather given to friends of those that had the approving power.
Not only would the scrapping of the allowances increase government revenue, but it would also allow Namibia to escape the European Union’s grey list of non-cooperative jurisdictions.
If the amendment is passed, manufacturing entities would also be subject to a 32% tax rate and no more additional tax deductions, said the Ministry of Finance.
Email: lazarus@namibian.com.na
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