THE dominance of foreign investors in the mining sector might result in a loss of state revenue due to active tax planning by multinational enterprises.
Tax malpractice risks originate from several circumstances, including the dominance of multinational enterprises and over-reliance on profit-based tax regimes.
Unintentional revenue losses and unfair gains for investors who can take advantage of tax breaks and regulatory loopholes.
This was included in the African Peer Review Mechanism (APRM) Namibia country report presented to President Nangolo Mbumba in the capital last week.
The primary purpose of the APRM is to boost the adoption of policies, standards and practices which can lead to political stability, high economic growth, sustainable development and accelerated regional and continental economic integration.
“Lack of sector knowledge and expertise makes the whole tax system prone to intentional overstating of costs by companies, and understatement of the grade or quality of minerals for tax avoidance purposes. Combating tax evasion remains a significant challenge in Namibia, particularly in the extractive and mining sector,” reads the review report.
Therefore, the Africa peer review panel recommends that the Namibian government should, for combating tax evasion in the extractive sector, develop a national strategy to curb potential tax malpractices through robust legal and law-enforcement systems.
Namibia now faces new engines of growth for the economy from the mining sector, which includes the green hydrogen ambition and oil discoveries offshore.
Exploration in 2022 continued with its upward trajectory, breaching N$1.3 billion in real terms.
Launching and presenting the report, APRM lead panellist for Namibia, Abdoulie Janneh, said it highlights both commendable practices that Namibia can share with peers across the continent, as well as challenges in governance.
“The 11 commendable practices include Namibia’s world-class transport infrastructure, standards in national statistics, women’s empowerment programmes and agriculture. The challenges include implementation of policies. We need to accelerate the policy devotion as part of the transfer of delegated responsibilities and land reform, among others,” said Janneh.
At the same occasion, Mbumba said the launch of this report is a clear testimony of the Namibian government’s commitment to enhancing the country’s governance architecture by strengthening processes, systems and institutions as a means of delivering socio-economic development.
“While launching the report is important, the measure of success will be how Namibia effectively integrates the recommendations into existing sectoral strategies and plans. I, therefore, welcome the initiative by the continental secretariat to mobilise funding towards augmenting national resources in the implementation of the National Plan of Action,” said the President.
The report stated that not all activities within the National Programme of Action (NPoA) require financial resources for implementation. The NPoA expenditure is expected to supplement the country’s annual budget, as well as increase its overall capacity to implement its NDPs and Harambee Prosperity Plan II (HPPII).
The aggregated indicative cost of the NPoA is estimated at more than N$9 billion.