By Dawid Shikongo
In Namibia, the Pay-As-You-Earn (PAYE) system operates on a fundamental principle, employers are legally obligated to deduct tax from employee salaries and remit it to the Namibia Revenue Agency (NamRA).
Yet when errors occur, whether through miscalculation, outdated tax tables, or administrative negligence the consequences often fall disproportionately on the employee.
This article examines the structural imbalance in Namibia’s tax administration, arguing that the current framework places an unfair burden on workers who have neither the expertise nor the statutory authority to ensure correct deductions.
Employer Obligations Under Namibian Law
Namibian tax law is unambiguous about where the responsibility for PAYE deductions lies. Schedule 2, Part II, Paragraph 2(1) of the Income Tax Act, 1981, states that “every employer who pays or becomes liable to pay any amount by way of remuneration to any employee shall… deduct or withhold from that amount by way of employee’s tax” and remit it to the Minister within 20 days after the end of the month. This is not merely a procedural guideline, it is a statutory duty.
The courts have reinforced this obligation. In “Musheti v The Auditor-General”, the High Court of Namibia held that “where an employer complies with that requirement of the law, he or she cannot be regarded as violating an order of court by deducting an amount, if due to NAMRA under the Act”.
The judgment further noted that failure to deduct or withhold renders the employer “personally liable for payment of the amount due for deduction or withholding”.
NamRA’s own guidance confirms this arrangement. Employers must register for PAYE, apply the correct tax tables, deduct employee Social Security where applicable, and issue payslips showing gross pay, deductions, and net pay.
The employer is also required to issue a PAYE 5 certificate to each employee, detailing total remuneration and tax deducted.
The Assessment Process where the burden shifts.
Despite these clear employer obligations, the annual tax assessment process effectively transfers the risk of employer error onto the employee. Each year, salaried individuals must submit a self-assessment return of income by 30 June.
This return requires employees to declare their income and verify the PAYE deducted against what their employer reported to NamRA.
Here lies the crux of the problem. If an employer has under-deducted PAYE throughout the year, perhaps due to a payroll system error, misapplication of tax brackets, or failure to implement new tax rates, the shortfall becomes apparent only during assessment. At that point, NamRA pursues the employee for the outstanding tax liability, not the employer who made the error.
The employee, who has no control over payroll calculations and often no visibility into the employer’s tax submissions until receiving a PAYE 5 certificate, is suddenly liable for a debt they did not create and may not have known existed.
The tax regulator validates the PAYE 5 information provided by the employer against the employee’s return, and any discrepancy becomes the employee’s problem to resolve.
The 2024 Tax Rate Amendment: A Case Study in Structural Unfairness.
The recent PAYE refund debacle illustrates this imbalance vividly. When the Namibian government amended income tax rates effective 1 March 2024, raising the tax threshold from N$50,000 to N$100,000 the law was not gazetted until months later.
During this gap, employers continued deducting PAYE based on the old rates, resulting in over-deductions for many employees.
For example, an employee earning N$350,000 annually was paying approximately N$6,083 monthly in taxes under the old rates, when they should have been paying N$4,916 under the new rates, an over-deduction of N$1,166 per month.
Over seven months, this amounted to over N$8,000 wrongly withheld from a single employee’s salary.
NamRA directed employers to reimburse employees for the excess PAYE collected, either by offsetting against future remittances or through direct payment.
But when employers failed or refused to comply, the burden fell on employees to claim refunds from NamRA during their 2025 tax returns.
Labour expert Herbert Jauch noted that “it might be an uphill battle for many workers to get their refund,” and unions questioned why employers should bear responsibility when they had already remitted the money to the government.
The National Union of Namibian Workers stated it would not hold employers accountable “because the employers have already paid the money to the government”.
This reasoning, however, misses the point, the employer paid money that was never lawfully theirs to deduct in the first place.
The employer’s failure to implement the new rates promptly or to adjust deductions once the law was gazetted created the overpayment. Yet employees were left to navigate bureaucratic refund processes to recover money that should never have left their salaries.
The Knowledge Asymmetry – is that employees cannot be expected to verify deductions.
A central injustice in the current system is the assumption that employees can or should verify the accuracy of their PAYE deductions. The reality is that most employees lack the technical knowledge to do so.
Tax calculations in Namibia involve progressive brackets ranging from 0% to 37%. The formula for determining PAYE liability requires understanding cumulative thresholds, rebates, and the interaction between various deductions such as retirement fund contributions. For an employee negotiating a salary, the focus is understandably on the net take-home amount not on the algebraic intricacies of Schedule 4 of the Income Tax Act.
As the search results note, employees rely on employers to “apply the current tax tables for the relevant tax year” . The employer has access to payroll software, tax tables, and professional accountants or payroll administrators. The employee has none of these resources.
When an employee receives a payslip showing a deduction for “PAYE,” they have no practical means of verifying whether that amount is correct. They trust reasonably that the employer has complied with its statutory duty. When that trust is misplaced, the employee suffers.
The case for shifting the onus to employers.
The argument for placing the onus squarely on employers is both practical and principled.
First, employers are the only parties with the information and capability to ensure correct deductions. They control payroll systems, have access to updated tax tables, and can engage tax professionals. The law already imposes a duty on them to deduct correctly. If that duty is breached, the consequences should follow the duty.
Second, employees have no agency in the deduction process. They cannot instruct their employer to deduct a different amount, nor can they compel the employer to implement new tax rates promptly. Holding employees liable for outcomes they cannot control is fundamentally unjust.
Third, the current system creates perverse incentives. An employer who under-deducts PAYE benefits from improved cash flow in the short term the employee’s salary appears higher than it should be while the risk of future liability rests with the employee. An employer who over-deducts similarly bears no immediate cost, as the money is remitted to NamRA and the employee must pursue recovery.
Fourth, the administrative burden on employees is significant. Filing a self-assessment return, reconciling PAYE 5 certificates, and pursuing refunds through NamRA’s ITAS system requires time, literacy, and often professional assistance. For low-income workers in particular, these burdens are prohibitive.
Potential objections and responses.
Critics might argue that employees benefit from PAYE deductions and should therefore share responsibility for ensuring accuracy. This argument fails because the benefit spreading tax liability across the year is a function of the system, not a choice the employee makes. Employees do not opt into PAYE, it is imposed by law.
Others might contend that employees receive PAYE 5 certificates and can review them. But reviewing a certificate showing “tax deducted, N$X amount” provides no basis for evaluating whether N$X amount is correct without independently calculating the liability. The certificate confirms what was deducted, not whether it was correct.
A more nuanced objection is that shifting all liability to employers could create enforcement difficulties, particularly where employers become insolvent or disappear. In such cases, the state would bear the loss. But this is a collection problem, not a justification for misplacing liability. Governments routinely bear the risk of insolvent debtors, and NamRA has extensive powers to pursue non-compliant employers, including personal liability for directors.
Toward a Fairer Allocation of Responsibility.
Namibia’s PAYE system rests on a simple premise, employers deduct, employees receive net pay, and the state collects revenue. When errors occur, the party responsible for the error, the employer should bear the consequences.
The current framework violates this principle. It allows employers to make mistakes (or worse, to act negligently) while employees, who are legally and practically powerless to prevent those mistakes, absorb the cost. The 2024 tax amendment chaos demonstrated this starkly, employees were over-taxed for months, and many are still waiting for refunds they should never have had to claim.
Reform should focus on three principles. First, NamRA should pursue employers directly for under-deductions, treating the employer’s statutory duty as creating liability for breach. Second, over-deductions should trigger automatic refunds from NamRA to employees, with employers required to adjust their remittances accordingly rather than placing the onus on employees to claim. Third, employers who repeatedly miscalculate PAYE should face escalating penalties, including personal liability for directors in cases of gross negligence.
Until such reforms are implemented, the burden of employer incompetence will continue to fall on the workers least able to bear it. That is not fair, and it is not just.
*Dawid Shikongo writes this article in his own capacity as a Seasoned Banker.
