Namibia cracks down on multinationals avoiding taxes with loss declarations

Multinationals operating in Namibia have been declaring losses to avoid paying taxes to the government.

Namibia Revenue Agency (Namra) commissioner Sam Shivute, speaking on network media hub’s current affairs programme ‘The Agenda’, recently said there are currently 400 multinationals operating in the country, 300 of those are in tax paying positions and 104 have been declaring losses since inception.

According to Shivute, these companies have been abusing transfer pricing.

“You will find people submitting zero returns while they are trading and others will be inflating their expenses,” said Shivute.

He further told The Namibian although there are businesses that have been making losses, no business can be on a going concern basis indefinitely if they are making losses.

“Some companies have been declaring losses, but after we (Namra) start an audit investigation, that same company will be paying over N$150 million in taxes,” said Shivute.

To deal with the issue, Shivute said Namra has started to conduct audits and will not be taking any records presented to them on face value.

“We are receiving technical assistance from the African Development Bank and United Nations Development Programme to help conduct specialised audits into different sectors,” said Shivute.

Namra will start conducting audits into the insurance and retail industry and will continue with the audits in the mining, fishing and construction sectors, he added.

In Namibia, there is no specific time limit for transfer pricing record keeping. Transfer pricing refers to the prices charged for goods or services exchanged between related companies within a corporate group.

These transactions often occur across different countries, and the pricing decisions can significantly impact a company’s tax liability and profitability.

During the tabling of the national budget in March, the Ministry of Finance and Public Enterprises tabled an amendment to the Income Tax Act of 1981 to stop businesses from indefinitely carrying over expenses allowing them to go years without paying taxes.

The new bill introduces a limit of 30% on interest deductions and stipulates that losses carried forward should be limited to five years, and 10 years for businesses in the mining sector.

Shivute added that Namra has access to taxpayers’ bank accounts and can get any information they need from the Ministry of Finance and Public Enterprises, leaving no room to hide.

“We have access to the bank accounts and we can get information from the system within the finance ministry, where payment may have been made. We are not saying pay more in taxes, but just pay your fair share of taxes,” said Shivute.

Earlier this year, the agency conducted audits into the fishing industry, where it discovered that the industry was the lowest contributor to the treasury.

Speaking on those audits, Namra spokesperson Steven Ndorokaze said there were 14 companies investigated for tax evasion.

Between 1 May and 19 July, Namra issued administrative summonses in accordance with the applicable laws and raised tax assessments to determine the tax liability.

This was followed by the appointment of third parties to pay funds in respect of tax debts owed by identified taxpayers.

“This action resulted in the recovery of N$20 million from 14 fishing companies,” added Ndorokaze.