Public enterprises receive tax debt relief

The Ministry of Finance and Public Enterprises has created an operational budget, including N$1,4 billion for once-off tax debt relief for selected public enterprises.

This aims to clear legacy debt accumulated prior to the establishment of the Namibia Revenue Agency (Namra).

Finance minister Iipumbu Shiimi announced this on Wednesday during the tabling of the national budget under the theme ‘Continuing the Legacy of Hage Geingob by Caring for the Namibian Child’.

“I would like to emphasise that this is an exceptional one-off exercise to clear the legacy debt of public enterprises accumulated prior to the establishment of Namra,” he said.

Shiimi said the eligible enterprises are those of which the funding has been severely reduced due to fiscal consolidation in previous years.

The selected beneficiaries include the University of Namibia, TransNamib, the Namibian Broadcasting Corporation, New Era Publication Corporation, the National Fishing Corporation of Namibia and the Roads Contractor Company.

“This action is undertaken to enable Namra to apply the law to all taxpayers equally. Should any public enterprise accumulate tax liabilities going forward, the treasury is not prepared to offer any support,” Shiimi said. Economist Salomo Hei says all the selected enterprises have the same shareholder, and during the budget tabling Shiimi indicated they are expecting a boom in income and expenditure.

“It is critical to ensure accountability moving forward. We should not wait for six months of income taxes, but they should do it more often in order to keep record of how far they are,” he says.

Hei says entities need to understand the importance of compliance.

He asks if these enterprises cannot comply with taxes, how would they comply with other corporate governance issues.
“We hope this particular clean slate also implores them to get their act together,” he says. Business management expert Lameck Odada says public enterprises have been allowed to operate without any audited financial statements that would give a true and fair representation of their financial situation, thus encouraging tax debts.

“The government must put strict policies in place to ensure guidelines are followed to the letter,” he says.

Odada says these bailouts are unsustainable and the government would run out of funds.

“Unless governance structures at these entities are strengthened, we will keep having the same issues. The government must enter into performance contracts with these entities.”