• July 2nd, 2020

EPZ regime in the spotlight

Maihapa Ndjavera

Popular Democratic Movement (PDM) parliamentarian Nico Smit said the loopholes created by the tax concessions for Export Processing Zone (EPZ) companies and certain manufacturing firms have long been a direct and substantial source of revenue loss for the government. Contributing to the debate on the income tax amendment bill this week in the National Assembly, Smit said Namibians have been robbed for so long by people who claimed to have their best interests. 

“It is thus astonishing that it has taken the ministry 17 years since the last amendment and almost 24 years since the implementation of the EPZ regime to realise it has never worked,” Smit said. He said it is crucial to revisit the very beginnings of this “failed” exercise concerning the EPZ. He explained that tax concessions gave the exported products a price advantage in the destination markets. He further said smuggling goods across the border, especially when it was made easy by the official policy in Namibia, became a lucrative business. 

Smit emphasised that these same channels, working in reverse, led to the immense forex losses that Namibia suffered two years ago and which have not been resolved to date. He continued that it must be clearly understood that the income tax amendment bill will affect two separate entities. “The first is the EPZ companies, as I explained, and the other is local manufacturers, be they legitimate or quasi-legal, which must apply for manufacturing status and to which certain tax concessions are then granted,” he concluded. 

He claimed the current government ruined the first and successful EPZ after it gave in to demands of the labour unions. He stated that it was clear that the government saw the EPZ as nothing more than a convenient milk cow to be exploited for its benefit. According to him, operational EPZ companies left the zone one after the other, due to the unions’ intransigence and another attempt was made to change the status, locality and operations of companies in the EPZ regime, amending the legislation to grant EPZ status to several industrial areas. 

Smit continued that the government has known all along that these earlier amendments to the Income Tax Act were exploited and abused by individuals who relied on their political connections to rob Namibia. “The irony is that Namibia’s business community and many members of the public have been aware of this for many years but it has taken the government more than ten years to realise the EPZs are bleeding its fiscal dry. 

Furthermore, Finance minister Calle Schlettwein said it was only after the ministry undertook a review of conditions under the EPZ regime and the manufacturing tax incentives that it realised the “anticipated growth” was never achieved and that this legislation created a tax loss. “How many reviews do you need to realise crime is happening right under your nose and it is costing you money?” he questioned. 

Moreover, Smit stated that some legitimate companies would be affected by this abrupt cancellation of the EPZ advantages and the manufacturing incentives regime. He said it would be a sensible approach to switch gradually from one framework to another. Yet, he earnestly hopes the proposed special economic zone regime will receive more attention than the current scenario and that the process will not be hijacked by just another generation of racketeers who are only interested in amassing riches to the detriment of the nation.
- mndjavera@nepc.com.na

Staff Reporter
2020-02-28 08:34:07 | 4 months ago

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