Namibia won’t follow South Africa’s VAT hike

The Ministry of Finance and Public Enterprises says it will not be following in South Africa’s footsteps to raise value added tax (VAT).

Last week, South Africa raised its VAT by 0.5% after initially proposing a 2% increase that was rejected by parliament.

Deputy executive director in the ministry of finance Oscar Capelao says Namibia has a independent tax policy that is divorced from other Southern African Customs Union countries including South Africa.

“Our tax amendments are informed, firstly by domestic conditions such as re-balancing of fiscal tools for revenue, competitiveness of our fiscal regime, principle of fairness and equity of taxes and boosting the local economy for growth.”

Capelao also says the increased VAT in South Africa will not impact Namibia, as this is not the first time rates have changed.

VAT is a domestic consumption tax, meaning tax is incurred by the end user.

Exports are zero-rated, meaning no VAT is added to exports by exporting parties, while importing countries apply respective VAT rates at the point of import.

“Our imports from South Africa will continue to be subject to our 15% rate,” says Capelao.

This means that the increase will not immediately increase business costs.

“Businesses claim input VAT on their returns to tax authorities. Therefore, a change in rate should not immediately increase business costs at a VAT line level, as business do not incur the VAT costs,” says Capelao.

This means that consumers will not also see an increase in the price of goods and services in the short term.

“Broadly, full VAT cannot be passed on to consumers since there is a trade-off to be made by businesses to protect sales volume,” says Capelao.

Namibia’s budget is set to be tabled in parliament after the new members of parliament are sworn in on 21 March 2025.