WINDHOEK, Feb 20 (Reuters) - Namibia will repeal two controversial tax incentive policies for exporters and manufacturers, partly to meet a 2021 deadline set by the European Union to avoid being blacklisted as a tax haven, Finance Minister Calle Schlettwein said on Thursday.
In 2018 the EU removed Namibia from its 2017 list of non-cooperative tax jurisdictions, after the diamond producer made commitments to address EU concerns surrounding its tax policies.
Schlettwein said in a statement that repealing the Export Processing Zone (EPZ) and manufacturing tax incentives would help restore international confidence in the southern African country and prevent a loss of government revenue.
The decision will affect at least 19 companies operating in the manufacturing, mineral processing and motor vehicle assembly sectors, including a copper smelter owned by Canadian based Dundee Precious Metals and a zinc refinery owned by India’s Vedanta.
Namibia introduced the EPZ regime in 1995, granting tax incentives to export-oriented manufacturing firms in exchange for technology transfer, capital investment and job creation.
The regime exempted companies from corporate income tax, duties and value-added tax on machinery, equipment and raw materials imported for manufacturing purposes. The only taxes payable were personal income tax on employees’ income as well as a 10% withholding tax on declared dividends.
Under the manufacturing tax incentives, the corporate tax rate was halved to 18%.
Schlettwein said the government had reviewed the EPZ and manufacturing tax incentives and concluded that they had failed to attract new investments and create jobs as desired.
“Namibia being blacklisted as a result of the EPZ regime and manufacturing exporter regime ... also contributes to the phasing out of the regimes,” the finance minister said.
Schlettwein said the EPZ regime would be replaced by special economic zones, a plan for which was being finalised. ($1 = 15.1045 rand) (Reporting by Nyasha Nyaungwa Editing by Alexander Winning)