The Treasury has introduced a cocktail of tax reforms that will see the government raking in N$180 million in taxes from the insurance sector.
The Minister of Finance and Public Enterprise Iipumbu Shiimi said the change takes effect in the 2024-2025 financial year and is projected to yield additional revenue of N$180 million per year.
While tabling the N$100.1-billion 2024/25 budget and the Medium Term Expenditure Framework, Shiimi announced that the amendments are “to ensure that the principles of fairness and equity in taxation are fully applied to the insurance sector”.
He noted that the reforms are part of efforts to ensure that the State receives its fair share of the tax revenue collection across many sectors.
Shiimi said his Ministry is in the process of amending the law to remove the nonresident shareholder tax exemption on foreign insurance company shareholders and provide for taxation of shareholder activities like other businesses.
Insurance companies had for years enjoyed the benefit of paying less as opposed to other high-income generating companies/industries because of lax laws.
The amendments have been on the Ministry’s agenda to amend the tax policies after it emerged that some Namibian companies pay an average tax rate of 30%, while insurance companies pay around 12%.
In an interview with The Brief, the Ministry’s Deputy Executive Director of Economic Policy, Oscar Capelao, said the insurance sector has contributed less to government revenues as a result of outdated laws.
“The fiscal regime lagged 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 said.
As a result, he said the planned tax reforms for the insurance sector were urgent.
“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%,” he said.
“The principle of taxation is fairness, and that is what we aim to achieve …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 circumstances.
“It is all about fairness, others are dully paying their dues as per the economic condition, and 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.
