Home Economy Namibia: Chinese-owned tobacco company spared from paying taxes

Namibia: Chinese-owned tobacco company spared from paying taxes

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Namibian finance minister Calle Schlettwein has blasted a policy that excused a Chinese owned tobacco company from paying national taxes.

The company, Namibia Oriental Tobacco CC, which employed seven Namibians wants to grow tobacco on 10 000 hectares of land at Liselo, outside Katima Mulilo, in north-eastern Namibia. It is co-owned by Swapo’s Oshikoto regional coordinator Armas Amukwiyu and his Chinese partners.

According to information issued by Schlettwein, the company invested N$10 million in Namibia, and “created seven jobs for Namibians”.

Schlettwein listed Namibia Oriental Tobacco CC as one of the 19 special companies which received Export Processing Zone (EPZ) status from the Namibian government.

An EPZ is a government policy which allows companies such as Namibia Oriental Tobacco CC – to avoid paying various taxes, including corporate income tax, stamp and excise duties, as well as value-added tax on the purchases of equipment and raw materials imported into Namibia.

Namibia’s EPZ law states that any services provided to an EPZ-accorded entity should not carry VAT. This, for instance, means that when the tobacco plantation feeds the factory, such trade will not carry VAT.

Amukwiyu admitted that they received a tax exemption but could not provide more details.

He said the seven Namibians were employed at the company when it started.

EPZs are issued through the state-owned Namibia Industrial Development Agency (Nida), which falls under Tjekero Tweya’s trade ministry.

Namibia introduced the EPZ regime in 1995 as a tax incentive to attract export-driven manufacturing companies.

The government had hoped that these companies would bring technology, money, skills and jobs as well as boost the country’s foreign currency reserves.

However, this has not been the case.

“The factual situation is that Namibia’s EPZs were not achieving the targets they were set up for, for example employment- creation, growth, and improved revenue streams,” Schlettwein said.

“To the contrary, they resulted in being a net loss because we forfeited more income through the tax holiday for EPZs than additional tax revenue through improved economic activity,” he added.

Some companies which benefited from these incentives failed, and others fear that it could get worse if the incentives are scrapped.

It is unclear as to who gets these tax-free benefits, but it appears that it is mostly companies with political links.

EPZs became a hot topic several years ago when it emerged that president Hage Geingob – as trade minister– approved giving the French-owned uranium mine Trekkopje export processing zone status.

This allowed the company to avoid paying taxes for five years, a privilege not enjoyed by other uranium miners, such as Rössing Uranium and Langer Heinrich.

Geingob, who was paid a consulting fee of N$3 million by UraMin [the sellers of the mine which received EPZ status], denied any wrongdoing in the past.

The tobacco plantation appears to be politically pushed.

The plantation idea has been widely criticised, while some Cabinet ministers have endorsed it.

The proposal has been around for years but gained prominence again last year when the Chinese company made a presentation to Cabinet.

Presenting a business plan at Cabinet is a privilege enjoyed by few companies in Namibia, but Cabinet secretary George Simataa said at the time such practice was permitted.

One of the key figures in approving or rejecting the plantation project is land reform minister Utoni Nujoma, who reportedly facilitated entry for the Chinese company to present at Cabinet last year.

He has in the past supported the project, claiming in parliament in 2016 that the plantation would set Namibia on a path to industrialisation.

At the time, Nujoma said Namibia should learn from Cuba, which exported Cuban cigars, and that the tobacco would not be for local consumption.

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