Namdeb’s tax break in the equation
30 April 2020 | Opinion
TOBIAS NANDE NANDJIGWA
WINDHOEK
Namdeb, the county's largest diamond company, last year applied for a tax break to prolong the lifespan of its operations until 2023 (Euronews, 2019). Namdeb further warned that it might have to retrench workers if the tax break was not granted.
So, can we as a nation just believe the narrative that from 1920 to 2019 (99 years) CDM/Namdeb Holdings didn’t saved enough riches to keep going a mere three more years without applying for a tax break? Matthew Gardner, an American Senior Fellow at the Institute of Taxations and Economic Policy (ITEP), said: “When you are a company of success, profitable and cash rich, you make investments when you have money to do them and when you see the need for those investments.” Why did Namdeb not see this need in its planning?
Meaning by applying for a tax break at the eleventh hour, it confirmed that not the best business minds had been at the helm of Namdeb to plan with regard to its strategic long-term sustainable development goals - given an indecisive business decision begging for a mainstream economic answer due to its own business inefficiency.
Absolute integrity
If Namdeb is truly passionate about serving and excelling with absolute integrity, then for the entire century of mining, there ought to have been enough preparedness for reserve funds to extend its lifespan.
This can be a classic case study of a nation's wealthiest corporation exploiting loopholes to avoid taxes.
In 2018, a CNBC documentary titled ‘How the US Federal Income Tax Was Paid $0 By Amazon While Making Billions’ detailed the same excuse of research and technology investment. This dirty truth educates us that it all seems to be part of a new but larger trend by wealthiest corporates eyeing tax exemption while profiting billions in a short time. It says that “apart from Amazon, several major companies like General Motors (GM) and Netflix became disruptors of Federal Revenue income and perfected it through tax breaks in the past decade”. So, therefore, in the corporate world, it was mainly the CEOs like Jeff Bezos of Amazon and corporate shareholders that benefited from these tax breaks, not merely the average citizens or the loss of work per se. Every Namibian must really wonder whether this Namdeb bargain is really benefiting the average citizen.
In his article titled ‘Major Companies Push the Limit of a Tax Break’ published in The New York Times in 2013, David Kocieniewski contends that “the expansion of the tax break once intended to help farmers 90 years ago illustrates the challenges ahead and how special interests have learned to use the tax code to maximum effect”. Meaning a tax break is not just a justifiable incentive to boost special interests of the likes of Namdeb’s economy but it can be an unfortunate loophole that corporates highly capitalised in maximising their profits and savings. So, how is it going to be in for Namdeb’s case? We are witnessing a reverse of the affirmative action in the collection of our revenue and regression of the wealthiest corporate profiteers.
Kocieniewski further noted that “some major American companies - including Cendant, Wells Fargo, and General Electric - have routinely pushed the boundaries while claiming lucrative tax savings according to evidence presented at a federal trial in New York where the Obama administration estimates that it diverts almost US$3 billion a year from the Treasury” (The New York Times, 2013).
Eye-opener
This must be an eye-opener to Namibians to question the sincerity details and the scale of Namdeb’s tax break because we are further learning from Kocieniewski that “most major corporate companies have constituencies of taxpayers, lobbyists and elected officials in their pockets who fiercely defend them, making it politically treacherous not to deny them tax break”, a scepticism that is highly likely to be sitting with our Namdeb case, given the current climate of our politicians coercive ploys with wealthiest companies to amass wealthy for self-enrichment.
In 2018, Steven M. Rosenthal, a senior tax lawyer who set the rules for US Congress between the lobbyists and politicians for six years, argued in support of Kocieniewski that, “The interest is disproportionate. The trouble is those with the most resources have the loudest voice.”
In our Namdeb context, once the break is granted, the tax deficit in our revenue would be filled by someone, either “small businesses in the informal sector or middle-income earners as they don’t have lobbyists and as we had witnessed former finance minister Calle Schlettwein proposed it (‘Taxman Targets Informal Sector’, The Namibian, 2018).
So, the tax layman questions aroused by Kocieniewski are: what is the true cost of Namdeb’s purported tax break? Will this nation not expect Namdeb tax break targets to expand from narrow into a vast margin of their tax-exclusion purpose?
Vulnerability
Given the vulnerability of our tax revenue service system, are we capable to monitor all Namdeb and its subsidiaries' transactions and savings if even the advanced Obama administration were caught up pants down in that complicated mess push according to Kocieniewski?
In 2018 UN report on Tax Incentives in Developing Countries even confirmed that “the theoretical positive effect of tax incentives has been questioned and thus some governments have used different models, unfortunately, such a sophisticated model is often not an option for developing countries due to budget and resource constraints”. (Alexander Trepelkov, etc, 2018)
How will we be certain that the entire funds diverted from the revenue will go for the intended research purposes?
Hypothetically speaking, in an event where the tax break is granted, will Namdeb be restricted not to access its subsidiaries’ accounts and transections because if not, then it would be tantamount to tax deferral as Kocieniewski drew this empirical evidence in his article. In addition to that, any government tax lawyer to prove these transactions in the Namdeb scenario would be cosmetic in substance since the government has an equal share of 50/50 with De Beers. Unless there would be an intermediary to approve this unorthodox arrangement of transections; but who again can take us into his/her confidence, neutrality, and trust of an intermediary dealing with the wealthiest pocket power as Namdeb?
Assets
Again, if Namdeb decides to sell its equipment or assets while in the tax break period, would it be subjected to taxations or not? Or if any of its partners and subsidiaries decides to buy any other assets or equipment that got nothing to do with its operational lifespan, would it be taxable or not? Kocieniewski continue to ask.
If a multibillion-dollar diamond giant company like Namdeb can be granted a tax break on the basis of the art of in-kind exchanges why not instead a tax break for civil servants (even for a month or two) on the basis of the long decade galloping inflation and the scorching recession without any increment for more than five years? Thus, the ‘typical taxpayers’ in Namibia, who are considered lacking concerns and voiceless with regard to how their tax should be utilised, deserve a tax break to pick up from the daily economic hardship instead.
Generational poverty
I suggest the tax break programme must be severely limited to civil servants and infant local companies alone given the disadvantaging Namibian historic economic structure and the generational poverty of the black majority.
The solution must be that the ungrateful ‘De Beer Cartel Unmitigated Avarices’ (Udo Froese, 2013) Anglo-American marketing niche, sight-holders and the emeritus of the likes of Oppenheimer whom we have seen recently donating R1 billion to the South African government and the likes of the Maurice Tempelsman families must pump back capital for the Namdeb lifespan project. The tax break should be offered directly to average workers instead of a complete Namdeb tax exemption. The government must instead also tax heavily the Namdeb board members, its CEO and its entire executives.
We are warned by Kocieniewski to bear in mind that the appeasement to Namdeb “would have a domino effects on other corporate companies too, and worse the foreseeable tax break entitlement syndrome that would be tough to cease”.
*Tobias Nande Nandjigwa refuses to be a typical taxpayer. He is pursuing a BCom degree in law and commerce with SBS.
WINDHOEK
Namdeb, the county's largest diamond company, last year applied for a tax break to prolong the lifespan of its operations until 2023 (Euronews, 2019). Namdeb further warned that it might have to retrench workers if the tax break was not granted.
So, can we as a nation just believe the narrative that from 1920 to 2019 (99 years) CDM/Namdeb Holdings didn’t saved enough riches to keep going a mere three more years without applying for a tax break? Matthew Gardner, an American Senior Fellow at the Institute of Taxations and Economic Policy (ITEP), said: “When you are a company of success, profitable and cash rich, you make investments when you have money to do them and when you see the need for those investments.” Why did Namdeb not see this need in its planning?
Meaning by applying for a tax break at the eleventh hour, it confirmed that not the best business minds had been at the helm of Namdeb to plan with regard to its strategic long-term sustainable development goals - given an indecisive business decision begging for a mainstream economic answer due to its own business inefficiency.
Absolute integrity
If Namdeb is truly passionate about serving and excelling with absolute integrity, then for the entire century of mining, there ought to have been enough preparedness for reserve funds to extend its lifespan.
This can be a classic case study of a nation's wealthiest corporation exploiting loopholes to avoid taxes.
In 2018, a CNBC documentary titled ‘How the US Federal Income Tax Was Paid $0 By Amazon While Making Billions’ detailed the same excuse of research and technology investment. This dirty truth educates us that it all seems to be part of a new but larger trend by wealthiest corporates eyeing tax exemption while profiting billions in a short time. It says that “apart from Amazon, several major companies like General Motors (GM) and Netflix became disruptors of Federal Revenue income and perfected it through tax breaks in the past decade”. So, therefore, in the corporate world, it was mainly the CEOs like Jeff Bezos of Amazon and corporate shareholders that benefited from these tax breaks, not merely the average citizens or the loss of work per se. Every Namibian must really wonder whether this Namdeb bargain is really benefiting the average citizen.
In his article titled ‘Major Companies Push the Limit of a Tax Break’ published in The New York Times in 2013, David Kocieniewski contends that “the expansion of the tax break once intended to help farmers 90 years ago illustrates the challenges ahead and how special interests have learned to use the tax code to maximum effect”. Meaning a tax break is not just a justifiable incentive to boost special interests of the likes of Namdeb’s economy but it can be an unfortunate loophole that corporates highly capitalised in maximising their profits and savings. So, how is it going to be in for Namdeb’s case? We are witnessing a reverse of the affirmative action in the collection of our revenue and regression of the wealthiest corporate profiteers.
Kocieniewski further noted that “some major American companies - including Cendant, Wells Fargo, and General Electric - have routinely pushed the boundaries while claiming lucrative tax savings according to evidence presented at a federal trial in New York where the Obama administration estimates that it diverts almost US$3 billion a year from the Treasury” (The New York Times, 2013).
Eye-opener
This must be an eye-opener to Namibians to question the sincerity details and the scale of Namdeb’s tax break because we are further learning from Kocieniewski that “most major corporate companies have constituencies of taxpayers, lobbyists and elected officials in their pockets who fiercely defend them, making it politically treacherous not to deny them tax break”, a scepticism that is highly likely to be sitting with our Namdeb case, given the current climate of our politicians coercive ploys with wealthiest companies to amass wealthy for self-enrichment.
In 2018, Steven M. Rosenthal, a senior tax lawyer who set the rules for US Congress between the lobbyists and politicians for six years, argued in support of Kocieniewski that, “The interest is disproportionate. The trouble is those with the most resources have the loudest voice.”
In our Namdeb context, once the break is granted, the tax deficit in our revenue would be filled by someone, either “small businesses in the informal sector or middle-income earners as they don’t have lobbyists and as we had witnessed former finance minister Calle Schlettwein proposed it (‘Taxman Targets Informal Sector’, The Namibian, 2018).
So, the tax layman questions aroused by Kocieniewski are: what is the true cost of Namdeb’s purported tax break? Will this nation not expect Namdeb tax break targets to expand from narrow into a vast margin of their tax-exclusion purpose?
Vulnerability
Given the vulnerability of our tax revenue service system, are we capable to monitor all Namdeb and its subsidiaries' transactions and savings if even the advanced Obama administration were caught up pants down in that complicated mess push according to Kocieniewski?
In 2018 UN report on Tax Incentives in Developing Countries even confirmed that “the theoretical positive effect of tax incentives has been questioned and thus some governments have used different models, unfortunately, such a sophisticated model is often not an option for developing countries due to budget and resource constraints”. (Alexander Trepelkov, etc, 2018)
How will we be certain that the entire funds diverted from the revenue will go for the intended research purposes?
Hypothetically speaking, in an event where the tax break is granted, will Namdeb be restricted not to access its subsidiaries’ accounts and transections because if not, then it would be tantamount to tax deferral as Kocieniewski drew this empirical evidence in his article. In addition to that, any government tax lawyer to prove these transactions in the Namdeb scenario would be cosmetic in substance since the government has an equal share of 50/50 with De Beers. Unless there would be an intermediary to approve this unorthodox arrangement of transections; but who again can take us into his/her confidence, neutrality, and trust of an intermediary dealing with the wealthiest pocket power as Namdeb?
Assets
Again, if Namdeb decides to sell its equipment or assets while in the tax break period, would it be subjected to taxations or not? Or if any of its partners and subsidiaries decides to buy any other assets or equipment that got nothing to do with its operational lifespan, would it be taxable or not? Kocieniewski continue to ask.
If a multibillion-dollar diamond giant company like Namdeb can be granted a tax break on the basis of the art of in-kind exchanges why not instead a tax break for civil servants (even for a month or two) on the basis of the long decade galloping inflation and the scorching recession without any increment for more than five years? Thus, the ‘typical taxpayers’ in Namibia, who are considered lacking concerns and voiceless with regard to how their tax should be utilised, deserve a tax break to pick up from the daily economic hardship instead.
Generational poverty
I suggest the tax break programme must be severely limited to civil servants and infant local companies alone given the disadvantaging Namibian historic economic structure and the generational poverty of the black majority.
The solution must be that the ungrateful ‘De Beer Cartel Unmitigated Avarices’ (Udo Froese, 2013) Anglo-American marketing niche, sight-holders and the emeritus of the likes of Oppenheimer whom we have seen recently donating R1 billion to the South African government and the likes of the Maurice Tempelsman families must pump back capital for the Namdeb lifespan project. The tax break should be offered directly to average workers instead of a complete Namdeb tax exemption. The government must instead also tax heavily the Namdeb board members, its CEO and its entire executives.
We are warned by Kocieniewski to bear in mind that the appeasement to Namdeb “would have a domino effects on other corporate companies too, and worse the foreseeable tax break entitlement syndrome that would be tough to cease”.
*Tobias Nande Nandjigwa refuses to be a typical taxpayer. He is pursuing a BCom degree in law and commerce with SBS.
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