Finance Minister to table tax amendment bill this year

By Michael Uugwanga

THE Minister of Finance is expected to table the Tax Amendment bill during the current financial year, said Justus Mwafongwe, Commissioner for Inland Revenue Department in the Ministry of Finance.

The Tax Amendment bill is aimed at taxing Namibian athletes and musicians from their earnings inside or outside the country as a way by government to generate extra income due to the country’s weak economy.

In August, the central bank said government could expect less tax revenue this year as the wholesale and retail sector, where indirect tax such as VAT is collected, came under increasing pressure.

Athletes and musicians eligible to be taxed are those based in Namibia, meaning that foreign-based footballers, boxers and other athletes or musicians will be exempted from the provisions of the bill. Mwafongwe could, however not say when exactly Finance Minister Calle Schlettwein would table the Tax Amendment bill in parliament.

The Namibian economy is heavily reliant on the country’s mining industry, which accounts for 50 percent of foreign exchange earnings.               

“The proposed tax amendments due to be tabled in parliament this financial year amongst others aim to introduce taxation of income on foreign earned income. The objective is to tax income of Namibian residents from a source other than Namibia. Declaration of foreign income will come into effect from the date the law is enacted in accordance with its implementing provisions.

“Chances are that this law will become operational as from the 2020 tax year. Logic is to tax residents on their worldwide incomes as opposed to taking only income from the source. This is an international trend. Taxation of foreign-earned income will be applicable to all Namibian residents, including athletes and musicians. Declaration will be done on an annual basis and two provisional payments,” he said.

Mwafongwe further said the tax amendment bill would go along with other tax amendment proposals as announced by Schlettwein during the national budget this year.

The Bank of Namibia has meanwhile predicted that the local economy is expected to contract by a further 1.7%, a complete about-turn from their April 2019 projections of 0.3% economic growth.

The bank also said the slump in the wholesale and retail sectors pose a fiscal challenge to the government as it cut its projected revenue collection, especially from value-added tax (VAT) revenue, which is the second-biggest domestic source of revenue after income tax.

The 2019/20 national budget documents show that the government estimates to collect N$12,4 billion in value-added tax, which is about 35% of the N$35 billion total revenue, excluding Southern African Customs Union receipts.

“Please note that taxation of foreign earned income is being proposed together with other tax amendment proposals as announced in the budget speech. There is no law in place yet except the current deeming provisions where certain foreign income is subject to taxation. After legislating this proposal, taxpayers will be required to declare all foreign earned income subject to an exemption. Only income earned from a Namibian source is taxable.

“A footballer who resides in England would be taxed in England. He will not be taxed in Namibia because his income is not from a source in Namibia. Of course, if he has earned other Namibian sourced income, he will be taxed in Namibia on such income. Even if Namibia is to tax based on residence, a footballer who resides in England would still not be taxed here because he is a resident of England not Namibia.”

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