Businesses buckle under tax refund
While employees are pleased with the additional disposable income resulting from the adjustment of Namibia’s tax schedules, business enterprises are starting to feel the pressure of the tax refund programme.
Employers correctly deducted pay-as-you-earn (PAYE) tax from employees’ salaries based on the previous tax tables.
The backdated revision of the Income Tax Act at the end of September raised the annual tax threshold from N$50 000 to N$100 000, and the rest of the tax tables were adjusted as well. Having been overtaxed previously, employees are now entitled to a tax refund.
Employers face challenges because PAYE is normally paid to the Namibia Revenue Agency (NamRA) on the 20th of the subsequent month, while these PAYE portions (and more) are now due at month end – at least 20 days earlier than usual – impacting their monthly cash flow.
Struggle
Eben De Klerk of the Economic Policy Research Association (EPRA) said businesses will simply have to bite the bullet in this regard.
“The problem is that businesses are all regarded as being the same. A big company can easily set off the refunds on their next PAYE payment run; they just pay less. A small business, with let’s say 20 employees, who all earn N$90 000 a year, cannot do this," De Klerk said.
He fears that some employers would be forced to repay refunds out of cash flows that do not stem from business operations but from the business owners themselves.
“They deducted and paid PAYE before, and now that the PAYE amounts to zero, they cannot offset it. So they fund it out of their own pockets, something that especially small businesses cannot afford.
"The government has created an expectation that businesses now have to meet and many of them simply cannot comply," he said.
Employers correctly deducted pay-as-you-earn (PAYE) tax from employees’ salaries based on the previous tax tables.
The backdated revision of the Income Tax Act at the end of September raised the annual tax threshold from N$50 000 to N$100 000, and the rest of the tax tables were adjusted as well. Having been overtaxed previously, employees are now entitled to a tax refund.
Employers face challenges because PAYE is normally paid to the Namibia Revenue Agency (NamRA) on the 20th of the subsequent month, while these PAYE portions (and more) are now due at month end – at least 20 days earlier than usual – impacting their monthly cash flow.
Struggle
Eben De Klerk of the Economic Policy Research Association (EPRA) said businesses will simply have to bite the bullet in this regard.
“The problem is that businesses are all regarded as being the same. A big company can easily set off the refunds on their next PAYE payment run; they just pay less. A small business, with let’s say 20 employees, who all earn N$90 000 a year, cannot do this," De Klerk said.
He fears that some employers would be forced to repay refunds out of cash flows that do not stem from business operations but from the business owners themselves.
“They deducted and paid PAYE before, and now that the PAYE amounts to zero, they cannot offset it. So they fund it out of their own pockets, something that especially small businesses cannot afford.
"The government has created an expectation that businesses now have to meet and many of them simply cannot comply," he said.
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