High corporate tax scares of foreign investors

Despite the expected reduction in Namibia’s corporate tax from 32% to 30% over the next two years, it still remains relatively high compared other to Southern African and the Southern African Development Community (SADC) member countries, according to an analysis by Simonis Storm.

SADC members include Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, United Republic Tanzania, Zambia and Zimbabwe.

Finance minister Iipumbu Shiimi during the mid-term budget review on Tuesday reiterated that the non-mining company (corporate) tax rate will reduced by two percentage points over the next two years to 31%, effective in April 2024 and a further decrease to 30% in April 2025.

“While this is welcomed, Namibia’s new corporate tax rate of 30% still ranks high when compared to Southern African and SADC member countries – keeping their tax rates constant and so will not be materially more competitive to attract foreign investors,” Simonis Storm pointed out.

Analysis by Simonis Storm on selected countries indicated that Namibia and Mozambique have the highest corporate tax rate of 32%.

Following in second place is Zambia at 30%, South Africa (27%), Lesotho and Angola (25%), Zimbabwe (24%), Botswana (22%), Mauritius (20%) and Madagascar (15%).

Revenue

Meanwhile, revenue projection the current financial period (FY23/24) was revised upwards to N$78.2 billion, compared to the initial projection of N$74.4 billion in the main budget.

The preliminary revenue outturn at the end of September 2023 stood at N$40.1 billion, equivalent to 53.7% of the initial revenue projections in the budget, Shiimi pointed out.

The strong medium-term fiscal outcomes necessitated an upward revision in revenues for FY2023/24 by N$3.8 billion.

Over the Medium Term Expenditure Framework (MTEF) period, revenue is forecast to grow by an average of 8.8% to reach about N$82.0 billion by FY2025/26. The positive adjustments in revenues for 2023/24 reflect robust mid-term collection rates, mainly on the categories of income tax on individuals, corporate tax on both diamond mining companies as well as non-mining companies, value-added tax and dividends from entities such as DebMarine, the Namibia Post and Telecom Holdings, the Namibia Desert Diamonds and the Namibia Port Authority, Shiimi added.

Significant upward revisions were also done on the categories of non-resident shareholder’s tax and withholding tax on services for which mid-term collections are more than 90% and 130%, respectively. These outcomes, in particular, partially reflect early tax gains from the ongoing exploration activities in the natural resources sector, Shiimi [email protected]