Deloitte: Export levies, environmental tax
Export levies and the History of the proposed levy
As part of an initiative by the Ministry of Finance to broaden the Namibian tax base and to encourage manufacturing and processing activities in Namibia, the introduction of export levies was first announced in July 2011. An export tax is a measure that allows the free movement of goods across borders, albeit subject to the tax.
Initial indications were that a 5% levy would apply to all exports of raw minerals, unprocessed fish, livestock, game, crude oil and gas. During stakeholder consultations, mainly from the mining, livestock and fishing sectors, the Minister announced, in November 2011, that the levy rate to be implemented would now range between 0% and 2%. Since that time, stakeholder meetings have continued and visits to various operations took place to enable the Ministry of Finance to conclude on the rates that should apply to different export products. The different rates are expected to be made public in the next few weeks.
The application of the rates will only become effective once the Export Levy Bill has been promulgated and after the Export Levy Act is published in the government gazette. Generally, with Namibian tax legislation, the Act includes a provision on the effective date for the relevant piece of legislation. We will therefore have to wait for the Act to be gazetted to know exactly when export levies will become applicable.
Extent and impact of the proposed legislation
The draft Export Levy Bill extends the levy to all minerals (as defined in the Minerals (Prospecting and Mining) Act of 1992), fish, game, crude oil and gas exported or to be exported from Namibia. “Minerals”, as defined in the above-mentioned act, essentially include all minerals but excludes soil, sand, clay, gravel and stone used for construction purposes.
The Export Levy Bill in itself does not differentiate and make no distinction between items of the same class that have undergone further processing in Namibia and those that have not undergone any processing. It also does not refer to raw or unprocessed products as initially indicated. It is therefore expected that the rates will cater for the distinction between products that have not undergone any value-additions and those that have. Should this not be the case, we believe the aim and objective of the proposed levy will not be met and it will essentially only serve as another source of revenue for the Fiscus. If the rates do make this distinction, it would be interesting to see how the Ministry has evaluated the extent of processing or beneficiation and how that was converted into the differential rates. It would also be interesting to see whether issues such as market requirements and demand for certain products (e.g. the market requires products in such a way that little processing is required) and the nature of the Namibian product was taken into account in the setting of the rates. If these and other related factors were not taken into account, one wonders if the Namibian exporter risks losing its market either through increased prices (to absorb the levy) or because it does not deliver in line with free market requirements (increase value addition to avoid the higher export levy rate). In other words: “Will the rates take into account the substitutability of the product, the long term demand and competitiveness in foreign markets?”
A further point of concern is that most of the products that will be subject to export levy are price sensitive and under great pressure from competitor countries. Other products are subject to prices that have been agreed on and will not allow an increase due to the introduction of export levies. We therefore do expect most of the exporters in question to have to absorb the export levy once introduced.
The draft Export Levy Bill also does not make provision for any exemption where other levies or taxes are applicable. For example all minerals are subject to royalties at differentiated rates. It follows that an exporter of minerals will in future in addition to royalties also be subject to the proposed export levy. Furthermore, the Bill does not include any provisions and measures for rebates in respect of returned goods or exported goods that re-enters the Namibian market for whatever reason.
Calculated on market value
The export levy is expected to apply on the consideration charged for the exported goods. Where no consideration will be received or where the consideration is lower than market value in respect of a transaction between connected parties, the open market value (a defined term) will need to be used for the calculation of the levy. These provisions are set out in the Export Levy Bill and may still change before the bill is published as law.
Payable at time of export
In terms of the wording of the Export Levy Bill, the levy will be payable at the time of exportation. The Export Levy Bill does not make provision for a deferred export account and we expect some practical difficulties relating to payments should this not be addressed in some way.
Documentation requirements
Exporters of goods that will be subject to the new levy must submit a bill of entry to Customs and Excise and pay the relevant export levy at the time of the export. The bill of entry will be in a prescribed format and will require relevant information for the calculation of the levy. Exporters will seemingly also be required to retain relevant documentation (including a record of all goods exported with sufficient detail to identify the goods, values, purchasers, recipients and sellers involved, a copy of any permit etc.) for a period of five years.
What to expect next?
We expect a press release from the Ministry of Finance in the next few weeks that will set out the relevant export levy rates. We further expect the formalisation of the Export Levy Bill and the publishing of the Act in the government gazette. The Act will make it clear from when levies will be applicable. Hopefully, the Act will also provide more details on some of the procedural uncertainties e.g. deferred accounts.
Environmental tax
The Minister of Finance, Saara Kuugongelwa-Amadhila announced during her 2014/2015 Budget Speech on 19 February 2014, that the first phase of the proposed environmental taxes is ready for implementation. The first phase will include carbon dioxide emission tax on motor vehicles (carbon tax), a levy on motor vehicle tyres and incandescent light bulbs. These taxes will most likely be introduced during the course of 2014. During initial discussions environmental taxes would also have been introduced on plastic bags and cans. Stakeholder consultation is continuing in respect of these items and we expect further developments during the course of the year.
The environmental taxes will be collected through the Ministry of Finance’s Customs and Excise Directorate. The manner of collection is not too clear, but it appears it if the importer or seller will collect the levies on behalf of the Ministry of Finance.
The current proposed rates, that may still change, are:
Carbon tax: Motor vehicles principally designed for the transport of persons – N$ 75 per g/km CO² and on motor vehicles principally designed for the transport of goods – N$ 100 per g/km CO².
Amongst the motor vehicles which are not subject to the carbon tax are tractors, motor vehicles for the transport of ten or more persons (including the driver), special purpose motor vehicles (including crane lorries, fire fighting vehicles, concrete-mixer lorries).
Pneumatic tyres: N$ 10 per tyre
Incandescent light bulbs: N$ 3 per bulb
We expect the rates to be confirmed during the next few weeks in a press release by the Ministry of Finance.
Environmental Tax
Environmental tax, also referred to as an Ecotax, is a tax intended to promote ecologically sustainable activities via economic incentives. Often an Ecotax attempts to maintain overall tax revenue by proportionately reducing other taxes (e.g. individual income tax), in other words balancing taxation levels to be revenue-neutral for government. An Ecotax is a regressive tax meaning that lower-income consumers pay a higher percentage of their total income for goods and services affected by the tax. The tax therefore imposes a greater burden on the poor than on the rich. The introduction of an Ecotax should therefore ideally coincide with measures to protect the most vulnerable to offset the increased costs, an example would be to raise the minimum tax threshold for individuals.
The objective of an Ecotax is very important to achieve the desired effect. If the objective is to reduce environmentally harmful behaviour, setting the tax rate too low would likely result in the objective not being achieved. An example is the plastic bag levy which was introduced in South Africa. Overall, the price of bags is low compared to an overall shopping bill. When consumers became accustomed to paying for the bags, the charge was absorbed into their grocery budget and the demand continued to climb.
On the other hand, if the objective is to raise revenues for the Fiscus, setting the rate too high could result in the behaviour being reduced to such an extent that the revenues collected from the tax do not meet its objective.
Environmental taxes, if implemented correctly, could have a number of positive attributes. The revenues raised may be used to reduce other taxes. It can be used to incentivise alternatives that are less environmentally harmful through grants, subsidies or tax incentives. Environmental taxes place a price on pollution, the cost of which is not included in market prices. This serves as an incentive for polluters to reduce pollution levels to the point where the cost of reducing pollution is equal to the environmental tax.
Carbon tax
Carbon tax is a tax levied on the carbon content of fuels and is a means of reducing greenhouse gas emissions. Carbon tax simply penalises companies and individuals that emit more carbon. Carbon tax is also a regressive tax in that it may directly or indirectly affect low income groups because the low income groups pay a higher percentage of their total income for goods and services affected by the tax. In most cases where a carbon tax is implemented, it is implemented in combination with various forms of exemptions or reduction in taxes, for example VAT and / or payroll taxes.
In Namibia there will not be any reduction in tax rates and we also understand that the carbon tax rate will not be different or reduced in respect of new imported vehicles from South Africa. South Africa will introduce carbon tax in January 2015, which could effectively mean that a double carbon tax be imposed on a new vehicles, unless South Africa provides for an exemption on exported vehicles. If these issues are not addressed, there are concerns that the additional tax could increase the cost of new vehicles to such an extent that there is a decrease in total car sales.
Will the objective of the proposed environmental taxes be achieved?
The Minister confirmed that environmental tax revenues will indeed be used to reduce environmentally harmful behaviour, but also to raise revenues for the Fiscus. The Minister commented that environmental issues impact the Namibian economy and all government projects even if only in an indirect manner. As a result the Ministry will not, it seems, earmark the money for specific environmental projects. The levies will rather be collected for the Fiscus and allocated where revenue is required. The Namibian environmental levies will therefore have a dual purpose and the Minister believes this approach will meet both the objective of reducing environmentally harmful behaviour and to raise revenue. We would however have liked to see a more specific allocation of the revenues to be collected e.g. allocation for grants, subsidies or tax incentives to incentivise the use of alternatives that are less environmentally harmful.
What to expect next?
We expect a press release from the Ministry of Finance in the next few weeks that will confirm the environmental levy rates. We further expect the formalisation of the Environmental Levy legislation and the publishing of the legislation in the government gazette. The Act will make it clear from when levies will be applicable and will presumable provide more details on matters like collections, due dates and remittance forms. We also expect further stakeholder consultation and developments in respect of the second phase of environmental levies e.g. plastic bags during the course of 2014.
Company profile: Deloitte
Deloitte & Touche Namibia is a member firm of Deloitte & Touche Tohmatsu, an international accounting firm founded in 1845, in London. Presently, the firm has physical presence in more than 150 countries around the world.
Our firm provides a range of accounting, auditing, taxation and consultancy services. We have been present in Namibia since 1959, serving a wide variety of clients throughout Namibia. Deloitte partners and managers are registered with the Public Accountants and Auditors Board of Namibia and the Institute of Chartered Accountants of Namibia.
Deloitte’s professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients commitment to each other and strength from cultural diversity. We enjoy an environment of continuous learning, challenging experiences and enriching career opportunities. Deloitte’s professionals are dedicated to strengthening corporate responsibility, building public trust and making a positive impact in their communities.
As part of an initiative by the Ministry of Finance to broaden the Namibian tax base and to encourage manufacturing and processing activities in Namibia, the introduction of export levies was first announced in July 2011. An export tax is a measure that allows the free movement of goods across borders, albeit subject to the tax.
Initial indications were that a 5% levy would apply to all exports of raw minerals, unprocessed fish, livestock, game, crude oil and gas. During stakeholder consultations, mainly from the mining, livestock and fishing sectors, the Minister announced, in November 2011, that the levy rate to be implemented would now range between 0% and 2%. Since that time, stakeholder meetings have continued and visits to various operations took place to enable the Ministry of Finance to conclude on the rates that should apply to different export products. The different rates are expected to be made public in the next few weeks.
The application of the rates will only become effective once the Export Levy Bill has been promulgated and after the Export Levy Act is published in the government gazette. Generally, with Namibian tax legislation, the Act includes a provision on the effective date for the relevant piece of legislation. We will therefore have to wait for the Act to be gazetted to know exactly when export levies will become applicable.
Extent and impact of the proposed legislation
The draft Export Levy Bill extends the levy to all minerals (as defined in the Minerals (Prospecting and Mining) Act of 1992), fish, game, crude oil and gas exported or to be exported from Namibia. “Minerals”, as defined in the above-mentioned act, essentially include all minerals but excludes soil, sand, clay, gravel and stone used for construction purposes.
The Export Levy Bill in itself does not differentiate and make no distinction between items of the same class that have undergone further processing in Namibia and those that have not undergone any processing. It also does not refer to raw or unprocessed products as initially indicated. It is therefore expected that the rates will cater for the distinction between products that have not undergone any value-additions and those that have. Should this not be the case, we believe the aim and objective of the proposed levy will not be met and it will essentially only serve as another source of revenue for the Fiscus. If the rates do make this distinction, it would be interesting to see how the Ministry has evaluated the extent of processing or beneficiation and how that was converted into the differential rates. It would also be interesting to see whether issues such as market requirements and demand for certain products (e.g. the market requires products in such a way that little processing is required) and the nature of the Namibian product was taken into account in the setting of the rates. If these and other related factors were not taken into account, one wonders if the Namibian exporter risks losing its market either through increased prices (to absorb the levy) or because it does not deliver in line with free market requirements (increase value addition to avoid the higher export levy rate). In other words: “Will the rates take into account the substitutability of the product, the long term demand and competitiveness in foreign markets?”
A further point of concern is that most of the products that will be subject to export levy are price sensitive and under great pressure from competitor countries. Other products are subject to prices that have been agreed on and will not allow an increase due to the introduction of export levies. We therefore do expect most of the exporters in question to have to absorb the export levy once introduced.
The draft Export Levy Bill also does not make provision for any exemption where other levies or taxes are applicable. For example all minerals are subject to royalties at differentiated rates. It follows that an exporter of minerals will in future in addition to royalties also be subject to the proposed export levy. Furthermore, the Bill does not include any provisions and measures for rebates in respect of returned goods or exported goods that re-enters the Namibian market for whatever reason.
Calculated on market value
The export levy is expected to apply on the consideration charged for the exported goods. Where no consideration will be received or where the consideration is lower than market value in respect of a transaction between connected parties, the open market value (a defined term) will need to be used for the calculation of the levy. These provisions are set out in the Export Levy Bill and may still change before the bill is published as law.
Payable at time of export
In terms of the wording of the Export Levy Bill, the levy will be payable at the time of exportation. The Export Levy Bill does not make provision for a deferred export account and we expect some practical difficulties relating to payments should this not be addressed in some way.
Documentation requirements
Exporters of goods that will be subject to the new levy must submit a bill of entry to Customs and Excise and pay the relevant export levy at the time of the export. The bill of entry will be in a prescribed format and will require relevant information for the calculation of the levy. Exporters will seemingly also be required to retain relevant documentation (including a record of all goods exported with sufficient detail to identify the goods, values, purchasers, recipients and sellers involved, a copy of any permit etc.) for a period of five years.
What to expect next?
We expect a press release from the Ministry of Finance in the next few weeks that will set out the relevant export levy rates. We further expect the formalisation of the Export Levy Bill and the publishing of the Act in the government gazette. The Act will make it clear from when levies will be applicable. Hopefully, the Act will also provide more details on some of the procedural uncertainties e.g. deferred accounts.
Environmental tax
The Minister of Finance, Saara Kuugongelwa-Amadhila announced during her 2014/2015 Budget Speech on 19 February 2014, that the first phase of the proposed environmental taxes is ready for implementation. The first phase will include carbon dioxide emission tax on motor vehicles (carbon tax), a levy on motor vehicle tyres and incandescent light bulbs. These taxes will most likely be introduced during the course of 2014. During initial discussions environmental taxes would also have been introduced on plastic bags and cans. Stakeholder consultation is continuing in respect of these items and we expect further developments during the course of the year.
The environmental taxes will be collected through the Ministry of Finance’s Customs and Excise Directorate. The manner of collection is not too clear, but it appears it if the importer or seller will collect the levies on behalf of the Ministry of Finance.
The current proposed rates, that may still change, are:
Carbon tax: Motor vehicles principally designed for the transport of persons – N$ 75 per g/km CO² and on motor vehicles principally designed for the transport of goods – N$ 100 per g/km CO².
Amongst the motor vehicles which are not subject to the carbon tax are tractors, motor vehicles for the transport of ten or more persons (including the driver), special purpose motor vehicles (including crane lorries, fire fighting vehicles, concrete-mixer lorries).
Pneumatic tyres: N$ 10 per tyre
Incandescent light bulbs: N$ 3 per bulb
We expect the rates to be confirmed during the next few weeks in a press release by the Ministry of Finance.
Environmental Tax
Environmental tax, also referred to as an Ecotax, is a tax intended to promote ecologically sustainable activities via economic incentives. Often an Ecotax attempts to maintain overall tax revenue by proportionately reducing other taxes (e.g. individual income tax), in other words balancing taxation levels to be revenue-neutral for government. An Ecotax is a regressive tax meaning that lower-income consumers pay a higher percentage of their total income for goods and services affected by the tax. The tax therefore imposes a greater burden on the poor than on the rich. The introduction of an Ecotax should therefore ideally coincide with measures to protect the most vulnerable to offset the increased costs, an example would be to raise the minimum tax threshold for individuals.
The objective of an Ecotax is very important to achieve the desired effect. If the objective is to reduce environmentally harmful behaviour, setting the tax rate too low would likely result in the objective not being achieved. An example is the plastic bag levy which was introduced in South Africa. Overall, the price of bags is low compared to an overall shopping bill. When consumers became accustomed to paying for the bags, the charge was absorbed into their grocery budget and the demand continued to climb.
On the other hand, if the objective is to raise revenues for the Fiscus, setting the rate too high could result in the behaviour being reduced to such an extent that the revenues collected from the tax do not meet its objective.
Environmental taxes, if implemented correctly, could have a number of positive attributes. The revenues raised may be used to reduce other taxes. It can be used to incentivise alternatives that are less environmentally harmful through grants, subsidies or tax incentives. Environmental taxes place a price on pollution, the cost of which is not included in market prices. This serves as an incentive for polluters to reduce pollution levels to the point where the cost of reducing pollution is equal to the environmental tax.
Carbon tax
Carbon tax is a tax levied on the carbon content of fuels and is a means of reducing greenhouse gas emissions. Carbon tax simply penalises companies and individuals that emit more carbon. Carbon tax is also a regressive tax in that it may directly or indirectly affect low income groups because the low income groups pay a higher percentage of their total income for goods and services affected by the tax. In most cases where a carbon tax is implemented, it is implemented in combination with various forms of exemptions or reduction in taxes, for example VAT and / or payroll taxes.
In Namibia there will not be any reduction in tax rates and we also understand that the carbon tax rate will not be different or reduced in respect of new imported vehicles from South Africa. South Africa will introduce carbon tax in January 2015, which could effectively mean that a double carbon tax be imposed on a new vehicles, unless South Africa provides for an exemption on exported vehicles. If these issues are not addressed, there are concerns that the additional tax could increase the cost of new vehicles to such an extent that there is a decrease in total car sales.
Will the objective of the proposed environmental taxes be achieved?
The Minister confirmed that environmental tax revenues will indeed be used to reduce environmentally harmful behaviour, but also to raise revenues for the Fiscus. The Minister commented that environmental issues impact the Namibian economy and all government projects even if only in an indirect manner. As a result the Ministry will not, it seems, earmark the money for specific environmental projects. The levies will rather be collected for the Fiscus and allocated where revenue is required. The Namibian environmental levies will therefore have a dual purpose and the Minister believes this approach will meet both the objective of reducing environmentally harmful behaviour and to raise revenue. We would however have liked to see a more specific allocation of the revenues to be collected e.g. allocation for grants, subsidies or tax incentives to incentivise the use of alternatives that are less environmentally harmful.
What to expect next?
We expect a press release from the Ministry of Finance in the next few weeks that will confirm the environmental levy rates. We further expect the formalisation of the Environmental Levy legislation and the publishing of the legislation in the government gazette. The Act will make it clear from when levies will be applicable and will presumable provide more details on matters like collections, due dates and remittance forms. We also expect further stakeholder consultation and developments in respect of the second phase of environmental levies e.g. plastic bags during the course of 2014.
Company profile: Deloitte
Deloitte & Touche Namibia is a member firm of Deloitte & Touche Tohmatsu, an international accounting firm founded in 1845, in London. Presently, the firm has physical presence in more than 150 countries around the world.
Our firm provides a range of accounting, auditing, taxation and consultancy services. We have been present in Namibia since 1959, serving a wide variety of clients throughout Namibia. Deloitte partners and managers are registered with the Public Accountants and Auditors Board of Namibia and the Institute of Chartered Accountants of Namibia.
Deloitte’s professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients commitment to each other and strength from cultural diversity. We enjoy an environment of continuous learning, challenging experiences and enriching career opportunities. Deloitte’s professionals are dedicated to strengthening corporate responsibility, building public trust and making a positive impact in their communities.
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