Tax Administration

C3601AT Taxation 1A

Bachelor of Accounting [NQF Level 7]

By

Dr Eukeria Wealth
Department of Auditing & Tax
School of Accounting

E. WEALTH (PhD) (ICTA) (ICPA)

 TAX ADMINISTRATION

We are taxed twice as much

by our idleness, three times
as much by our pride, and
four times as much by our
folly.” Benjamin Franklin
“A fine is a tax for
doing something
“Taxes are how we pool our
wrong. A tax is a fine money for public health and
for doing something safety, infrastructure, research,
right." and services — from the
development of vaccines and
the internet to public schools
and universities, transportation,
courts, police, parks, and safe
drinking water.” Holly Sklar
 LEARNING OBJECTIVES

Objective 04
Identify categories of
Objective 03 taxation

Objective 02 Explicate the bases of

taxation

Objective 01 List the canons of taxation

Outline the purpose of

taxation
 PURPOSE OF TAXATION

1
Revenue generation & restoration of macroeconomic stability
Revenue generation & restoration of macroeconomic stability

2 Wealth redistribution to promote equity in the society

Wealth redistribution to promote equity in the society

3 Stir economic policies, such as fiscal policy

Why
Stir economic policies, such as fiscal policy
taxation?

4 Help control international trade

Help control international trade

5 To discourage consumption of demerit goods

To discourage consumption of demerit goods
 CANONS OF TAXATION

Convenient
Taxes should be imposed in a manner that is Certain
convenient for taxpayers The tax liability ought to be exact,
not arbitrary

1 2

Cost effectiveness
Tax administration should be designed 4 3
in a manner that does not impose an
Horizontal equity
Every member of the state should
unreasonable burden on the taxpayer. contribute towards the burden of tax.

Efficiency Vertical equity

Tax should be imposed according to
Simple and transparent
the ability to pay.
 Bases of Taxation
A country can adopt either a source-based or a residence-based tax approach.

Residence-based Source-based
Principle Principle
Tax is levied based on the taxpayer’s Tax is levied based on where income is earned,
residence or domicile status, regardless of irrespective of the taxpayer's residence.
the source of the income.

Who is taxed? Who is taxed?

A tax resident’s worldwide income (both domestic The country where the source of income is
& global) is subject to tax in that country. located) has the right to tax that income.

Example Example
If a foreigner works in Namibia and earns income from
A South African resident is taxed on SA income
a Namibian company, Namibia has the right to tax that
& income earned from other jurisdictions.
income, even if the person is not a Namibian resident.

Pros & Cons Pros & Cons

Simplifies tax administration compared to Reduces the risk of double taxation for foreign residents,
tracking income sources. as only income earned within the country is taxed.

Possibility of double taxation. Could result in tax avoidance or evasion.

 CATEGORIES OF TAXATION

Feature Direct Taxes Indirect Taxes

Levied directly on income, wealth,
Levy Levied on goods and services.
or property.
Borne directly by the individual or borne by someone other than the
Taxpayer
business. person responsible for paying it
The tax burden can be passed on to
Transferability The tax burden cannot be shifted.
consumers through higher prices.
Income tax, corporate tax, property Sales tax, VAT, excise duty, customs
Examples
tax. duty.
Often progressive (taxes higher Often regressive (equal rate for all,
Progressive/Regressive
incomes more). regardless of income).
Typically requires filing returns and Collected at the point of sale or
Collection Method
reporting. service provision.

E. WEALTH (PhD) (ICTA) (ICPA)

Pros & Cons of in/direct taxes
Direct Taxes Direct Taxes Indirect Taxes Indirect Taxes

✓ Generally progressive ✓ High compliance cost ✓ Less compliance costs ✓ Regressive in nature
✓ Stable revenue source ✓ High collection costs ✓ Less administrative ✓ Inflationary in nature
✓ Equitable ✓ Disincentive for burden ✓ Discourage
✓ Encourage productivity ✓ Wide tax base consumption
redistribution ✓ stifle investment ✓ Encourage savings ✓ Less equitable
✓ Lower tax evasion risk

Pros Cons Pros Cons

REGRESSIVE & PROGRESSIVE
Progressive Taxes
this is represented by the increase in the tax rates as income
increases. They vary in direct proportion with the level of
income e.g. PAYE which starts at 0%, and increases to 18%, 25%
and so on. The more you earn the more tax you pay.

Proportional Tax
is one in which the effective rate of taxation remains constant
as the income of the taxpayer increases. Good examples would
be property tax and the tax rate on corporate companies and
close corporations that are fixed.

Regressive Taxes
this is represented by a flat tax rate and is not determined by
the size of income base. In other words, they have a relatively
greater impact on the poor e.g VAT.

E. WEALTH (PhD) (ICTA) (ICPA)

CHARACTERISTICS OF PROGRESSIVE, PROPORTIONAL & REGRESSIVE

Progressive Proportional Regressive

takes a larger percentage of takes the same percentage of takes a larger percentage of
income from high-income groups income from all income groups income from low-income groups
than from low-income groups than from high-income groups.

In Namibia, individual tax ranges Someone who earns N$25,000 If someone makes N$20,000 a
from 18% to 37% depending on annually would pay N$1,250 at a year and pays N$1,000 in VAT on
income level 5% rate, whereas someone who consumer goods, 5% of their
earns N$250,000 each year would annual income goes to VAT. But if
pay N$12,500 at that same rate they earn N$100,000 a year and
pay the same N$1,000 in VAT, this
represents only 1% of their
income.

Reduces income inequality Can be regressive Widens income inequalities

Can be difficult to administer Easy to administer a constant tax Can be difficult to administer
because of different tax rates rate despite income levels because of diff tax rates

E. WEALTH (PhD) (ICTA) (ICPA)

NAMIBIAN TAX

E. WEALTH (PhD) (ICTA) (ICPA)

 01
Tax The Namibian Constitution of 1990
with Amendments through 2010; Chpt 16 sets out the principles that
guide all aspects of public finances in Namibia

Legislation 02

Revenue Agency Act, No12 of 2017

Where NamRA derives its mandate from

03

Income Tax Act No 24 OF 1981

provides for the taxation of income (PAYE; CIT)

04

Customs and Excise Act No 20 of 1998

Levied on imported goods

05

Value Added Tax 10 of 2000

Levied on both domestic and foreign goods/ services
NAMRA POWER & FUNCTIONS
Assess and collect Assess and collect taxes and duties on behalf of the State•

Receive and record Receive and record all State revenue on behalf of the State•

Enforce the revenue, customs and excise laws, with respect to the collection of revenue as
Enforce provided by those laws•

Levy penalties and interest on overdue accounts, collect unpaid taxes and impose liens over
Levy properties, as provided by revenue laws•

Provide customs and excise services that facilitate trade, maximize revenue collection and
Provide protect Namibian borders from illegal importation and exportation of goods•

Improve Improve service delivery to taxpayers and promote compliance with the revenue laws•

E. WEALTH (PhD) (ICTA) (ICPA)

Duties & rights of the Commissioner

Tax collection & enforcement Administer & enforce tax laws

Ensure timely collection & enforce Provide correct interpretation of tax
payment and apply penalties & fines laws & enforce tax laws & regulations
in case of non-compliance

Safeguard taxpayer rights Taxpayer education

You can simply impress your Educate taxpayers on tax obligations,
audience and add a unique zing and rights & procedures
appeal to your Presentations

Conflict resolution Tax assessment & audit

Handling disputes & appeals through Fair assessment of returns &
arbitration, negotiation or mediation conduct audits & investigations

E WEALTH (PhD) (ICTA) (ICPA)

 Rights of a taxpayer

Right to confidentiality Right to be informed

Taxpayer information must be kept private You can simply impress your audience and
add a unique zing and appeal to your
Presentations.

Right to Appeal
Should be allowed to challenge an Fair and Accurate Assessments
assessment or decision. Right to pay not more than the correct
amount

Right to Equality
Be treated without discrimination Right to Certainty
Due processes must be clear and fair

E.WEALTH (PhD) (ICTA) (ICPA)

Tax Assessments & Returns

Real time access

& feedback Submit your
returns – (Sec
56; 60)

SELF ASSESSMENT ITAS

Sec 67 requires taxpayers
Integrated Tax
to determine their tax
Administration System Pay your tax
liability
Non-compliance attracts
penalties
Calculate your
tax due
 NOTICE OF ASSESSMENTS [Sec 67]
If a person fails to render a return, or fails to disclose his tax affairs in his return, NamRA will issue an estimated assessment/ additional assessment.

Details of the taxpayer

A reducedContent Here

Details of the assessment & the amount payable

assessment
may
Content
also be
issued for a
Notice of Due date for payment Contenttaxpayer
Here
assessment
who has
The place where an objection to an assessment must
be lodged
been
Text

overtaxed
(Sec
That any objection to the assessment must be lodged in Your Content Here 69)

writing within 90days from the date of issue of the notice

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OBJECTIONS AND APPEAL [Sec 71-77]

▪ Should be lodged within 90 days of assessment

▪ Where no objection is submitted the assessment will be deemed final
▪ If the taxpayer is not satisfied he can appeal to the tax tribunal court first if;
i) The amount of tax involved does not exceed N$100000
ii) The Commissioner and the taxpayer agree thereto
iii) No objection is made to the jurisdiction of the tribunal to hear the appeal

▪ If the commissioner deems the Special court to be most appropriate, or the taxpayer is not
satisfied with the outcome of the tribunal, the matter may be referred to the special court
for tax appeals within 30 days
▪ If the taxpayer is not satisfied with the outcome, he can appeal to the Supreme Court of
Namibia within 21 working days after the special court notice.

▪ Pay now argue later (Sec 78)

The taxpayer still needs to settle their tax obligations even if there is an objection, appeal
or pending decisions.

E. WEALTH (PhD) (ICTA) (ICPA)

RETURNS & PAYMENTS (Sec 94)
Returns Payments Due
Individuals (employees) 30 June each year
Companies Within 7 months after financial year end
Taxpayers (others carrying on Within 7 months after financial year end (30
business/profession/farming) September)
Provisional tax returns
Companies
Income tax: 1st provisional Within 6 months from the commencement of the
company’s financial year; 40% of the total actual
taxable income to be declared and paid
Income tax: 2nd provisional On/ before the last day of the company’s financial
year end.

E. WEALTH (PhD) (ICTA) (ICPA)

OFFENCES AND PENALTIES [Sec 65 & 96]

1 2 3 4

OFFENCES Failure to file or

submit returns
Failure to furnish the
commissioner with
Failure to disclose Obstructing or
hindering any officer in
any amount of gross
any information or income accrued or the discharge of his
documents required received to or in duties
by him favour of himself

Late payment Late submission Omission/ incorrect

statement
✓ 10% ✓ None ✓ Up to 200%
PENALTIES
✓ Interest 20% p.a
✓ Interest 20% p.a
BURDEN OF PROOF (Sec 72)
❑ The onus to prove that an amount is not subject to tax or subject to deduction
or rebate is upon the taxpayer not NamRA.

E. WEALTH (PhD) (ICTA) (ICPA)

 Tax Amnesty

TAX INCENTIVES
Tax holidays

Boot

Rebates

EPZ

DTAs

SMEs
 CONTEMPORARY ISSUES
• Reduction of the non-mining company tax rate to 31% effective 1 January 2024, to 30% by 1 January 2025, and
to 28% during FY 2026/2027
• Replacement of the 3:1 thin capitalization ratio with a 30% limit on interest deductions
• Introduction of a 10% dividend tax effective 1 January 2026
• Repeal of tax exemptions for nonresident shareholders of foreign insurance companies
• Introduction of a special economic zone regime (offering a reduced corporate income tax rate of 20% and
value added tax (VAT) zero rating) and an internship tax incentive program
• Introduction of buildings improvement deductions with an annual capital depreciation allowance of 10% for
eligible trade buildings
• Increase in mandatory VAT registration threshold from N$500,000 to N$1 million effective FY 2024/2025
• Exploration of VAT electronic invoicing (e-invoicing) system
• Increased income tax threshold for individuals to N$100,000 effective 1 March 2024
• Increased “sin taxes” or excise taxes that generally apply for alcoholic beverages and tobacco products
• Introduction of adjustments to transfer duties and stamp duties brackets, including raising the exempt level to
N$1.1 million and increasing the threshold for the 8% duty rate to N$3.15 million, effective FY 2024/2025
• Introduction of a supertax transfer duty and stamp duty bracket for luxury residential properties costing over
N$12 million
• Internship allowance
• Introduction of a 10% dividend tax effective 1 January 2026

E. WEALTH (PhD) (ICTA) (ICPA)

 SELF REVIEW QUESTIONS

Group Question
Discuss the challenges that are currently faced by NamRA and
experienced by taxpayers in Namibia. If you had the capacity to
change the Namibian tax regime, identify the things that you would
change and explain how you would improve them.

QN2 QN3 QN4

Discuss the extent Discuss the Discuss the
to which the necessity of tax controversies of
Namibian land tax incentives within taxing intangibles
aligns with the the Namibian in a digital world.
principle of context.
horizontal and
vertical equity.
E. WEALTH (PhD) (ICTA) (ICPA)
❑ Thank you and any questions?

E. WEALTH (PhD) (ICTA) (ICPA)