The Deputy Minister of Finance today tabled the Income Tax Amendment Bill that will close loopholes used by multinationals to move their profits out of Namibia to countries where they pay less or no tax at all.
Maureen Hinda-Mbuende tabled the bill which is a warning to multinationals who erode their tax base and also shifting profits offshore, under dubious tax strategies.
In terms of the thin capitalisation rules introduced through the changes to the act, tax administrators will be required to ignore any interest payment that is claimed by a taxpayer that exceeds the three to one ratio, as a result of financial assistance received from a related company.
Hinda-Mbuende said that this ‘’measure will help combat base erosion and profit shifting, in that companies will not be allowed to shift income earned from Namibia under the guise of exorbitant interest payments’’.
The amendments prescribe that any money earned through the sale or transfer of ownership of petroleum licence will be subjected to tax, as money that was sourced from Namibia, even if it was earned through a transaction done outside the jurisdiction of the country.
‘’This amendment will then subject income from these type of transactions that might occur outside Namibia to taxation,’’ the Deputy Minister warned.
Some of the amendments also speak to tax relief for local people
The proposed changes also provide for the increase in the deductible amount on pension funds and educational policy contributions from a limit of N$40 000 to N$150 000.
This relief is to encourage taxpayers to save more for their retirement as well as for the education for their children. The amendment to the tax act is also meant to create effectiveness in allocating payments towards the settlement of outstanding tax amounts, said Hinda Mbuende. Currently when a tax payer in arrears makes a payment, it is first allocated to the capital tax amount and if payment exceeds the capital amount, the difference is allocated to the penalty and then nay remaining amount to interest. ‘’This practice resulted in an unfair tax burden to the taxpayer, because the interest portion is always the final item to be allocated a payment and interest accumulates on a monthly basis and thus certain taxpayers find it difficult to settle their tax debts,’’ she said.The amendments to the act also changes the current provision where the employer pays insurance policies for its key employees and including such payments in the tax deductible income of such an employee as a fringe benefit. However, the
employee does not receive proceeds from the policy when it matures, said Hinda-Mbuende.
The amendment, she said, will therefore alleviate the tax burden of the employee who does not benefit from the policy. These amendments, she emphasised, are necessary to provide a measure of relief to taxpayers and to further enhance the efficiency and fairness of the tax system. The Income Tax Amendment Bill has been submitted for further deliberation and approval by Parliament.