Deloitte has mixed feelings over tax proposals

Deloitte Touche Namibia said this week that Minister of Finance, Ipumbu Shiimi’s tax policy stance was a combination of sentiments not to introduce new tax policy proposals which may stifle economic recovery and increasing the competitiveness, fairness and equity of the Namibian tax system.

“For the first time in many years, over ten tax proposals were announced,” the firm commented.

The individual income tax threshold will increase from the current N$50 000 to N$100 000. Deloitte noted that the proposal was initially made in the 2023 main budget and indications are now that it will be effective from 1 March 2024.

“With an effective date of 1 March 2024, we expect the change to be retrospectively applicable because we do not foresee the amendment being made within the next one to two months. The proposed changes are expected to account for N$646 million savings for taxpayers.”

Shiimi confirmed the reduction of the non-mining corporate tax rate from the current 32% to 31% effective 01 January 2024, 30% effective 1 January 2025 and to 28% during the 2026/27 finance year.

Deloitte said the effective dates, especially the rate change of 1 January 2024 is concerning because history has shown that amendments take some time to be promulgated.

“In addition, tax rate amendments are normally effective for tax years commencing on or after a particular date. In the absence of clarity at this point, the question is whether a taxpayer has to apply two tax rates in a particular year. For example, a company with a June 2023,” it said.

The firm noted that the minister seeks to complement the reduction in the non-mining tax rate by broadening the corporate income tax base through the replacement of the 3:1 thin capitalisation ratio with a 30% limit on interest deductions.

“It appears the rationale for granting a longer lapsing period for the natural resource sectors is the capital intensiveness of these industries. Should that be the case, we hope the minister considers industries other than the natural resources sectors as well, like renewable energy and manufacturing sectors,” said Deloitte.

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