Finance minister Iipumbu Shiimi clarifies tax refund amid employers’ over-deduction concerns

… Shiimi tells employers to pay employees’ tax refunds first, before paying Namra

Minister of finance and public enterprises Iipumbu Shiimi says employers are not required to pay tax to the Namibia Revenue Agency (Namra) until they have settled their workers’ tax overdeductions.

This applies to salary payments from 1 March this year.

Shiimi said this at the Government Information Centre last week.

In the past tax year, employers deducted Pay As You Earn (PAYE) taxes from employees’ salaries based on old tax rates.

The introduction of new tax rates may have resulted in some employees having been overtaxed.

Following Shiimi’s recent announcement regarding tax refunds, some business owners have been concerned about paying refunds while at the same paying taxes to Namra.

Shiimi last week said instead of paying the taxes due to the government, employers should first settle the overdeduction of employees.

“They don’t have to pay us now, they must pay their employees,” the minister said.

He said employers should pay off overdeductions that occurred from 1 March until the end of February next year.

Based on the old tax rates, companies and close corporations would pay corporate tax of about 32% of their incomes, Shiimi said.

“If you have taxable income, deduct your expenses. Once you make a profit, part of 32% of that profit goes to the government as a company or a close corporation,” he said.

The tax refunds of public servants who retired after the amended Income Tax Act came into effect will be paid by the Government Institutions Pensions Fund (GIPF), Shiimi said.

He said the government has realised it needs to reduce taxes, since they are high in Namibia, compared to neighbouring countries like Botswana and South Africa, which tax 25% and 28% on income, respectively.

He said tax needs to be reduced to attract investment.

Tax has currently been reduced to 31% for this year, while it will be reduced to 30% next year, Shiimi said.

“What we want to achieve is a competitive tax rate that is going to help us attract more domestic and foreign investments.”

Namibia Local Business Association spokesperson Marius Nangolo says his association welcomes the minister’s explanation as business owners were concerned about the unaffordability of refunding their employees while at the same time paying Namra.

“I think it’s good that we have been given that relief,” he says.

Nangolo asks that Namra write off the arrears some businesses have accumulated.