All eyes on 2021/22 Budget

As mentioned by finance minister Iipumbu Shiimi as part of the 2020/21 mid-year budget fiscal policy statement, the fiscal policy objective for the next three years will “focus on refuelling the economy and bringing it to its pre-Covid-19 growth trajectory”.

Chantell Husselmann, country senior partner and tax leader at PwC Namibia, expects that revenue for the 2021/22 fiscal year will either remain similar to that of 2020/21 or slightly decrease. This is due to the adverse impact of the Covid-19 pandemic on the global and domestic economy, as well as an anticipated stabilisation or decrease in receipts the Southern African Customs Union (SACU)which carry a two year lag.

“Although the possible rollout of the Covid-19 vaccine in the second half of 2021 may improve economic activity, the beneficial effect thereof might only be realised in the following years,” says Husselmann.

She foresees expenditure for the 2021/22 fiscal year to slightly increase from that of the prior year, as government balances cost-saving while continuing to focus on reducing the impact of Covid-19 in Namibia through the securing of vaccines, supplying of medical equipment/disposables and distribution of protective equipment/hygienic items within schools and communities.

“As debt stock levels increase due to historic deficits, the debt financing cost is also expected to increase for the 2021/22 fiscal year,” Husselmann says.

As a result of the above, it is expected that the budget deficit will increase for the 2021/22 fiscal year, automatically resulting in an increase in debt stock.

REVENUE COLLECTION

Johan Nel, corporate tax partner at PwC Namibia, expects an improvement in revenue collection during the 2021/22 fiscal year with the establishment and operation of the Namibia Revenue Agency (Namra), which will serve as an independent body on the collection of taxes.

Furthermore, the current tax incentive programme which is underway is expected to assist in revenue collection as taxpayers settle their outstanding capital amounts in benefiting from this initiative.

“The efficient and effective use of e-filing through the Integrated Tax Administration System (ITAS) allows for faster filing, processing and assessment of tax returns, ultimately enhancing revenue collection efforts,” Nel adds.

TAX PROPOSALS

Ansie Rossouw, tax partner in the PwC Walvis Bay office, is of the view that no proposed tax legislation such as increased tax rates and/or newly introduced taxes will be tabled during the 2021/22 annual budget. This approach is supported by the economic downturn experienced, which is mainly due to the Covid-19 pandemic during 2020.

“As a result of the contraction in the Namibian economy during 2020 and in creating a conducive economic environment for taxpayers (both juristic and natural), no increase in income tax rates, nor value-added tax (VAT) rates are anticipated for the 2021/22 fiscal year, as this would have a further crippling effect on spending that drives economic growth,” Rossouw says.

Although a major focus globally is that of climate change, environmental sustainability and green energy, PwC Namibia currently does not foresee any increase on environmental levies nor the introduction of additional levies. Environmental levies may, however, be expected to expand and increase over the following years.

“We do anticipate that the minister will further pronounce himself on the previously announced proposals that were under review in the previous year,” Rossouw says.

She elaborates: “Given the challenges faced in the Namibian economy, formerly announced income tax and value-added tax proposals, highlighted among others, is that of an increase in the threshold on deductions for contributions to an approved pension, provident fund or retirement annuity, which would be widely welcomed by many individual taxpayers. However, the possible removal of the zero rating of sugar and the introduction of VAT on the income of listed asset managers may have an adverse impact, as this would result in an added 15% cost.”

TAX RELIEF

Riana Esterhuyse, tax associate director at PwC Namibia, says “although we do not foresee any further tax relief measures to be introduced during the tabling of the annual budget speech (such as lower/discounted tax rates or payment holidays), the electronic filing tax relief programme for outstanding taxes is well underway”. With this initiative having come into effect on 1 February 2021, taxpayers may enjoy a 100% reversal of penalties and up to 95% waiving of their interest on outstanding taxes.

In order for taxpayers to successfully partake in this programme, they must register as an e-filer on the Integrated Tax Administration System (ITAS), file all outstanding tax returns electronically on the ITAS platform and settle the outstanding capital liability and thereafter the remaining interest balance.

CONCLUSION

“We look forward to finance minister Iipumbu Shiimi’s tabling of the 2021/22 annual budget speech, including the outlook on state revenue, the rationale behind expenditure allocations, as well as how Namibia’s debt stock is impacted throughout,” Husselmann says.

“As usual, our PwC experts will be ready on the day of the 2021/22 annual budget speech in analysing and providing key highlights of the national budget,” she adds.

Contact the PwC Namibia team at: [email protected]; [email protected]; [email protected] and [email protected]