Namibia is expected to fully commit to the Code of Conduct Group in international tax compliance matters that left the country blacklisted by the EU as a tax haven and subsequently moved to the grey-list, pending sufficient tax compliance policy reforms and commitments. The President of the Republic of Namibia, Dr Hage Geingob officially opened Parliament on 9 February 2021 during which time, a number of proposed Bills were announced.
While it is a known fact that Namibia joined the Inclusive Framework, it did so without subjecting the process to a legislative backing and support. The question is; which legal backing did Namibia use and presented before Parliament for approval to support her joining process to the Inclusive Framework? Taxation Conventions though, helpful, they are equally very complicated, highly risky if not properly handled.
By Joining the Inclusive Framework, Namibia has signalled her intention to comply with the Code of Conduct Group’s demands and to becoming part of the Global Forum on Tax Matters and to possibly ratify The Multilateral Convention on Mutual Administrative Assistance in Tax Matters. However, looking at the Bills that were announced to be presented to Parliament, there is nothing or no Bill that addresses Namibia’s participation and preparedness to the Code of Conduct Group’s commitment demands.
Unlike other Conventions which can be ratified by simply referring to the provisions in the country’s Constitution, international tax Conventions, are tricky and do not take that route.
The absence of any Bill to address and facilitate Namibia’s participation process to the Global Tax Bodies from the list of Bills presented to Parliament is already a signal that Namibia is far from understanding what ought to be done and a sad impression already to those that are expecting the country to comply. The level of institutional insolvency and blatant absence of capacity being displayed here is a laughable shame to the country.
If someone convinced government that joining the Inclusive Framework can be done through a unilateral express decision by the Minister of Finance, then our leadership was misled.
For instance, the functional model of Namibia’s economy is not the same as that of China. Namibia’s tax base and revenue base are not the same as those of Ghana. The tax structures that are harming Namibia’s economy are not similar to those in Brazil.
Namibia’s land policy is not the same as that of China. These are issues that ought to be understood and are what makes the Tax Conventions different from any other Conventions, from jurisdiction to jurisdiction and equally, it is what makes such Conventions very risky to the country if they are not handled properly.
Blunders have been committed in the past and continue to be committed, with effects on the performance of the economy due to Politicians receiving wrong advice and poor guidance as can be justified bellow:
Namibia promulgated the EPZ investment regime, without supporting the operation of the regime with a tax transparency legal instrument. This resulted in international tax compliance organisations and the Code of Conduct Group, in particular, to view the EPZ regime as a regime, which is harmful to tax purposes. Namibia did not get blacklisted, because of the existence of the EPZ Preferential investment regime. The country got blacklisted because the regime was; (a) ring-fenced, (an offence to international tax compliance principles (b) administered in the absence of a tax transparency legal instrument (another offence). Hence, the multilateral tax compliance organisation viewed this regime as one facilitating tax evasion, revenue shifting and money laundering, purely because of the regime being ring-fenced and lacking a tax transparency legal instrument in its administration.
Namibia joined the Inclusive Framework without subjecting her participation to any Parliamentary legislative process. Namibia has a parliamentary democracy through which legislations are formulated and debated, refined, rejected or adopted. Joining the Inclusive Framework without the support of the legislative arm is a regrettable blunder. The Inclusive Framework on Tax Matters is not a simple multilateral participation route, to be taken lightly like other routes to Conventions such as those on OCEANSs, Climate Change etc. It is clear that some foreign expatriates must have been brought in by the then Ministry of Trade and Industry, to help formulate the EPZ regime, without providing the Lawmakers with an understanding that when an investment regime such as the EPZ is ring-fenced, it ought to be administered with the support of tax transparency legal instrument.
Namibia signed a Bilateral Tax Treaty 21 years ago, which is asymmetric distributive and now harming the economy, such that treasury cannot generate sufficient revenues anymore but exposed to budget deficits, junk status, etc, and no capacity was provided on how the treaty must be interpreted to safeguard the economy.
Namibia administers ITAS – while at the same time unilaterally joining the Inclusive Framework, with no safeguard legal instrument in place.
In the face of such embarrassment causing blunders, the worst government does is to rely on the so-called foreign expatriates who come here as Messiahs when they are purely economic hackers and regime change architects, playing a big role in misinforming leadership.
One expects from the onset that among the Bills presented, there ought to be a sequence of Bills to signal Namibia’s response and preparedness to chart the process to the satisfaction of demands and tax compliance commitments.