High corporate tax rates ‘stifling businesses’

Economists have voiced concerns that Namibia’s high corporate tax rate could hinder the growth of small and medium enterprises (MSMEs) and start-up businesses.The tax rate, which is currently 32%, has also been found to be high by both regional and global standards.Weighing in on the matter, Cirrus Capital equity analyst Adrian Gläser said the rate poses a barrier to job creation."Namibia’s corporate tax is high by both regional and global standards. This serves as a material barrier to the success of small enterprises and job creation in Namibia, particularly given the operating environment of the last eight years," Gläser said.Room for improvementThe recent announcement by finance minister Iipumbu Shiimi over a reduction in the corporate tax rate was a positive development, he said.Namibia is expected to reduce the tax rate over the medium-term expenditure framework period."It is positive to see that there has been some shift in the approach to tax policy, particularly the minister of finance and public enterprises’ commitment to reducing the corporate tax rate to 31% in 2024 and 30% in 2025," he said.Despite the planned reduction, the rate would remain high and thus impact government revenue, Gläser said."These rates will still be high by regional and global standards. The impact on fiscal revenues will also be limited, as non-mining company tax revenue is among the smallest of government’s main revenue lines. Thus, there is room to do more," Gläser said.Tax policy &#039;one-dimensional&#039;One way to address the tax rate would be to implement different corporate tax rates per business sizes, he said."Namibia’s tax policy is very one-dimensional. This can be improved by, for instance, staggering tax rates for different size firms – such as lower tax rates for small firms or start-ups, and scaling up with time as companies grow and or mature. This provides some indirect support in the early phases, which tend to be very capital-intensive," he said."Furthermore, broader macroeconomic policy needs to be improved as well. Rather than offer incentives for specialised or certain industries, we need to first ensure that the macro is correct," Gläser added.Returns measuredIndependent economist Klaus Schade said while the corporate tax rate is high, investors are also interested in the returns they are getting."While the Namibian tax rate is higher than in South Africa and in particular in Botswana, what matters for most corporate taxpayers and investors is the level of public services and public infrastructure they get in return for the tax payments," Schade said.Government would be required to improve service delivery to improve on its high corporate tax rate, he said."A comparison needs to take into account both aspects. In order to be a more attractive investment destination, Namibia needs to improve public service delivery further, in addition to cutting corporate tax rates. The expansion of e-government will go a long way," Schade said.Schade also suggested varied tax rates based on the sizes of businesses as a way to address Namibia’s high tax rate."Since the government encourages start-ups and youth enterprises and supports MSME development, it could consider introducing a lower, time-bound corporate tax rate – for instance at 50% of the &#039;normal&#039; corporate tax rate – for specific categories of enterprises or specific economic sectors," he said.

High corporate tax rates ‘stifling businesses’

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Namibian Sun 2025-05-02

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High corporate tax rates ‘stifling businesses’

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Namibian Sun 2025-05-02

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