‘Back-pay of income tax will hurt business’
Private sector not consulted
Government failed to consult relevant stakeholders before implementing the new income tax regulations and this will have dire consequences for the business sector, employer representatives say.
Reimbursing workers for over-deducted income tax will hit businesses’ cash flow management and budgeting, employer representatives and labour unions say.
The Namibia Employers’ Federation (NEF), the Namibian Local Businesses Association (NALOBA), the National Union of Namibian Workers (NUNW) and the Trade Union Congress of Namibia (TUCNA) in a statement said the method to secure reimbursement to employees is an issue of “great concern”, “met with great trepidation”.
Finance minister Iipumbu Shiimi recently issued a statement, “granting authority and directing employers to reimburse the PAYE over-deducted from employees between 1 March 2024 and 30 September 2024 by deducting the reimbursed PAYE from the monthly employee’s tax amount to be paid to NamRA between 1 October 2024 and 28 February 2025.”
The amendments to the Income Tax Act, that raises the threshold for every income earner from N$50 000 to N$100 000 before income tax is charged, is regarded as a welcome fiscal initiative that will ensure that Namibians will retain more of the income and will therefore have more funds at their disposal, the group said.
At the same time, it will allow greater consumption that is likely to stimulate the economy.
Concerns
“While understanding government’s intentions, the concerns from an employer’s perspective are that in many instances it will have financial implications, where the immediate impact of reimbursing employees for over taxation and managing deductions from future income tax may pose challenges for businesses, particularly in terms of cash flow management and budgeting,” according to the group.
In addition, implementing the reimbursement process and accurately calculating and deducting the reimbursement amounts from future income tax payments will require additional administrative work, they claim.
“This may lead to increased workload and complexity in payroll processing for employers. It will be particularly daunting for employers without specialised expertise in tax matters that would have to ensure compliance with the new regulations and navigate the complexities of tax calculations.”
Lack of consultation
Taking into consideration the financial, administrative and compliance implications, of particular concern is also the fact that government did not engage in consultations with relevant stakeholders before implementing these regulations, the group said.
Instead, government opted to communicate the changes solely through the media.
“It is likely to create difficulties, as employees’ expectation will have been created due to the public announcement, without consideration of the implications. This can impact work relations,” the group warned.
Employers and labour union representatives highlighted the importance of consultation and collaboration between the government and stakeholders in the formulation and implementation of policies that impact the business community and the workforce.
The lack of prior consultation raises questions about transparency and the potential implications of the new taxation regulations on businesses and employees, the group said.
Engagement crucial
NEF president Elias Shikongo said: “Without any doubt, we believe that this amendment will not only provide immediate relief to our citizens, but also pave the way for a more prosperous and vibrant economy.
“Having said that, regrettably, we are very much concerned about the directive given to employers, without having consulted us about the implications of the process.
"We believe that it is crucial for the government to engage in meaningful consultations with employers and labour union representatives before implementing significant policy changes that affect the business environment," Shikongo stated.
“Despite the fact that income tax threshold increases will generally be very good for our households - as it is expected to kick-start the economy - we cannot expect that employers take on the work that NamRA {Nambia Revenue Agency] should do,” NALOBA president Erastus Shapumba noted.
“We have not been consulted by our government. This has administrative implications for all businesses; especially smaller businesses will really struggle with the additional administration, as well as financially, as the higher threshold will mean that many employees are no longer required to pay income tax.
“From which returns should employers then recover the expenses? How will they pay tax consultants to support them with the required implementation?” Shapumba wanted to know.
Labour unions
Labour union representatives echoed these sentiments, emphasising the importance of inclusive decision-making processes that take into account the perspectives and concerns of all stakeholders.
They called for greater transparency and dialogue between the government, employers and employees to address issues related to taxation and ensure that policies are implemented in a manner that is equitable and sustainable.
According to Job Munario, secretary-general of the NUNW: “We encourage open communication and collaboration between employers, employees and government agencies to address any concerns with regard to the reimbursement process and ensure a smooth transition to the new taxation regulations.
“By working together, we can uphold the integrity of the tax system and promote a fair and equitable environment for all stakeholders,” he said.
‘Happy in principle’
Kavihuha Mahongora, secretary-general of TUCNA, said:” In principle we are happy about the potential positive impact on the lives of the Namibian people, particularly the poorest members of society.
“By allowing individuals to keep more of their hard-earned income, this amendment will put more money in the pockets of those who need it most. This is likely to improve the standard of living for many Namibians.
“It is important, however, that both employers and employees are adequately supported to facilitate the refunding of the overpayment of income tax,” Mahongora added.
Moving forward, employers and labour union representatives are committed to engaging constructively with the government to address their concerns and work towards solutions that benefit both businesses and employees.
They emphasise the need for open communication, collaboration and consultation to find practical solutions to resolve matters with regard to the reimbursement of over deductions.
The Namibia Employers’ Federation (NEF), the Namibian Local Businesses Association (NALOBA), the National Union of Namibian Workers (NUNW) and the Trade Union Congress of Namibia (TUCNA) in a statement said the method to secure reimbursement to employees is an issue of “great concern”, “met with great trepidation”.
Finance minister Iipumbu Shiimi recently issued a statement, “granting authority and directing employers to reimburse the PAYE over-deducted from employees between 1 March 2024 and 30 September 2024 by deducting the reimbursed PAYE from the monthly employee’s tax amount to be paid to NamRA between 1 October 2024 and 28 February 2025.”
The amendments to the Income Tax Act, that raises the threshold for every income earner from N$50 000 to N$100 000 before income tax is charged, is regarded as a welcome fiscal initiative that will ensure that Namibians will retain more of the income and will therefore have more funds at their disposal, the group said.
At the same time, it will allow greater consumption that is likely to stimulate the economy.
Concerns
“While understanding government’s intentions, the concerns from an employer’s perspective are that in many instances it will have financial implications, where the immediate impact of reimbursing employees for over taxation and managing deductions from future income tax may pose challenges for businesses, particularly in terms of cash flow management and budgeting,” according to the group.
In addition, implementing the reimbursement process and accurately calculating and deducting the reimbursement amounts from future income tax payments will require additional administrative work, they claim.
“This may lead to increased workload and complexity in payroll processing for employers. It will be particularly daunting for employers without specialised expertise in tax matters that would have to ensure compliance with the new regulations and navigate the complexities of tax calculations.”
Lack of consultation
Taking into consideration the financial, administrative and compliance implications, of particular concern is also the fact that government did not engage in consultations with relevant stakeholders before implementing these regulations, the group said.
Instead, government opted to communicate the changes solely through the media.
“It is likely to create difficulties, as employees’ expectation will have been created due to the public announcement, without consideration of the implications. This can impact work relations,” the group warned.
Employers and labour union representatives highlighted the importance of consultation and collaboration between the government and stakeholders in the formulation and implementation of policies that impact the business community and the workforce.
The lack of prior consultation raises questions about transparency and the potential implications of the new taxation regulations on businesses and employees, the group said.
Engagement crucial
NEF president Elias Shikongo said: “Without any doubt, we believe that this amendment will not only provide immediate relief to our citizens, but also pave the way for a more prosperous and vibrant economy.
“Having said that, regrettably, we are very much concerned about the directive given to employers, without having consulted us about the implications of the process.
"We believe that it is crucial for the government to engage in meaningful consultations with employers and labour union representatives before implementing significant policy changes that affect the business environment," Shikongo stated.
“Despite the fact that income tax threshold increases will generally be very good for our households - as it is expected to kick-start the economy - we cannot expect that employers take on the work that NamRA {Nambia Revenue Agency] should do,” NALOBA president Erastus Shapumba noted.
“We have not been consulted by our government. This has administrative implications for all businesses; especially smaller businesses will really struggle with the additional administration, as well as financially, as the higher threshold will mean that many employees are no longer required to pay income tax.
“From which returns should employers then recover the expenses? How will they pay tax consultants to support them with the required implementation?” Shapumba wanted to know.
Labour unions
Labour union representatives echoed these sentiments, emphasising the importance of inclusive decision-making processes that take into account the perspectives and concerns of all stakeholders.
They called for greater transparency and dialogue between the government, employers and employees to address issues related to taxation and ensure that policies are implemented in a manner that is equitable and sustainable.
According to Job Munario, secretary-general of the NUNW: “We encourage open communication and collaboration between employers, employees and government agencies to address any concerns with regard to the reimbursement process and ensure a smooth transition to the new taxation regulations.
“By working together, we can uphold the integrity of the tax system and promote a fair and equitable environment for all stakeholders,” he said.
‘Happy in principle’
Kavihuha Mahongora, secretary-general of TUCNA, said:” In principle we are happy about the potential positive impact on the lives of the Namibian people, particularly the poorest members of society.
“By allowing individuals to keep more of their hard-earned income, this amendment will put more money in the pockets of those who need it most. This is likely to improve the standard of living for many Namibians.
“It is important, however, that both employers and employees are adequately supported to facilitate the refunding of the overpayment of income tax,” Mahongora added.
Moving forward, employers and labour union representatives are committed to engaging constructively with the government to address their concerns and work towards solutions that benefit both businesses and employees.
They emphasise the need for open communication, collaboration and consultation to find practical solutions to resolve matters with regard to the reimbursement of over deductions.
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