The Ministry of Finance and Public Enterprises says it is reviewing and reforming the country’s taxation policy, as it seeks to maximise taxes from the insurance sector.
This comes as Namibian companies pay an average tax rate of 30%, while insurance companies are paying around 12%.
The Ministry’s Deputy Executive Director of Economic Policy, Oscar Capelao, said the insurance sector has contributed less to the government revenues as a result of outdated laws.
“The fiscal regime lagged behind in moving with new business trends, further compounded with the aged Act, hence at present the state still finds itself taxing the insurance sector with yesteryear laws, which does not conform to current times,” Capelao told The Brief.
He said the planned tax reforms for the insurance sector were urgent and will soon be amended and enacted. We are engaging international technical partners to fast forward the review.
“Our specific laws do not speak to the current realities, and no major amendments have been undertaken as things were changing. That is why we are busy benchmarking, in terms of how competitive we can be, because it does not make sense for an insurance company operating in Namibia to contribute a single digit tax, while in other countries they pay up to 28%. The principle of taxation is fairness, and that is what we aim to achieve,” he said.
Capelao said “this will be a grim reality which many insurance companies will not want to endure, as they would still prefer to operate under the current circumstancesâ€.
“It is all about fairness, others are dully paying their dues as per the economic condition, therefore the same should be done to any other sector. It is not right that in other territories you pay more, but when it comes to Namibia contributions are very little, for the same products,” he added.
In October, Finance Minister Iipumbu Shiimi said the Ministry will soon be undertaking the necessary engagements with relevant stakeholders to ensure that principles of fairness and equity in taxation are fully applied especially to the insurance sector.
“Research shows that Namibian insurers enjoy a very low effective tax rate and pay no non-resident shareholders tax in comparison to other sectors. Thus, going forward, more substantive tax policy commitments will be made in future budget statements once we have more certainty on the medium-term revenue outlook,” he said during his Mid-term Budget review.
In the meantime, Shiimi said the Namibia Revenue Agency will continue to strengthen its audit and compliance capabilities to ensure that the existing laws are fully complied with and that the State receives the revenues due.
