The Namibia Revenue Agency (NamRA) is structuring an independent auditing department that will only focus on the oil, gas and renewable sectors to curb tax evasion and maximise revenue collection in these sectors, an official has revealed.
NamRA’s Commissioner Sam Shivute said for many years the country has been losing revenue on transactions within the petroleum, gas and renewable sectors.
“The hey-days are over as we edge closer to learning, and refining policies that will enable us to tax the oil, gas and renewable sector, so that the State can receive its fair share from her natural resources which have been for years plundered, as a result of weak legislative systems,” Shivute told The Brief, in an interview.
“Before 2015 we have seen scenarios in Namibia where holders of EPL and mining licences, sell such licences to foreign companies outside the jurisdiction of the country, as a result, the State was unable to tax such transactions because our country’s laws were resource-based taxation. Thus, when such transactions happen outside Namibia, the State gains nothing from such proceeds of sales or donation, even though the minerals are coming from here.”
Shivute commended authorities for amendments to several laws in the country. In 2015, the Cabinet amended the Income Tax Act 1981 to improve the definition of “gross income” with regard to the specific inclusions of restraint of trade payments and the sale of petroleum licences or rights.
The amendments were also done to provide for withholding tax on interest paid to non-residents and withholding tax rate on management fees and consultancy fees paid to non-residents.
The Income Tax amendments also provided for a definition of “Namibia”, amended the royalty rate to provide for the allocation of tax payments and collection of tax and provided for incidental matters.
“I must commend our lawmakers for passing the Income Tax Amendment Bill, Act 13 of 2015, of the income tax, amending section one, that defines gross income, leading to an expansion of the definition so that it can include the taxing of proceeds from petroleum and any other mineral extractions. The good news about this, is that those who have obtained petroleum, EPL and mining licences after 2015 will now be subjected to taxing even if such transactions happened abroad, we shall catch up soon,” he said.
“What we are doing now is to capacitate the team, especially our auditing team, very soon within eight months we shall have an oil and gas dedicated department focused on that sector. We are busy setting up [the] structure, training sessions to ensure that they are ready and understand the transfer pricing including having the full knowledge of the industry’s value chain from exploration until production.”
Despite the significant progress, the Commissioner acknowledged that it is not an easy-going process, hence the elevated push in preparation to have everything ready by the time production commences in the various sectors.
“Namibia needs to benefit from her national resources by collecting enough revenue stretching across underserved areas,” he reiterated.
In October Shivute said he led a team of auditors and senior officials to Angola on a working visit to engage the regulator and taxpayers, in an effort to understand the entire chain from exploration, supply, production, taxation and the challenges they are experiencing.
“We are further planning to take them to other developed countries. In addition, we are working hand in hand with the International Monetary Fund, the African Tax Administration Forum and the World Bank, as we endeavour to have our officials capacitated,” he said.
Shivute said when the auditing process to trace activities is set up, NamRA will engage the Ministry of Mines and Energy, including the Business and Intellectual Property Authority (BIPA), “it is not complicated, records will always be there, and therefore there is nowhere to run or hide.”
“In the meantime, we have a voluntary compliance option, and we urge those who sold their licences and have not paid their taxes beyond the enactment of Act 13 of 2015 to come forward, because we are going to initiate some audits across the sector, and if found wanting we shall calculate the dues from 2015 to the current time,” he said.
