Objection to the introduction of a Dividend Tax in Namibia
While the objective of increasing government revenue is understood, introducing a dividend tax is likely to have adverse effects on investment, capital retention, and the broader economy.
Dividend taxes discourage investment by reducing the return on equity capital. This is particularly problematic in a developing economy such as Namibia’s, which relies heavily on private investment to stimulate job creation, industrialisation, and innovation. According to the World Bank’s Doing Business reports (2020), economies that have introduced high dividend taxes have witnessed a slowdown in business confidence and foreign direct investment (FDI).
Furthermore, empirical studies show that dividend taxation often leads to capital flight and tax avoidance, especially in economies with limited investment incentives. Namibia already has a high overall tax burden compared to both global and regional peers. The top marginal personal income tax rate in Namibia stands at 37%, while corporate income tax remains fixed at 32% for non-mining entities. When compared to neighbouring Botswana (22%) and Zambia (30%), Namibia is significantly less competitive in attracting capital.
Moreover, it is important to highlight that dividend tax is effectively a second tax on the same profit. After a company pays corporate income tax on its profits, any dividends distributed to shareholders are subject to further taxation.
*Jason Nangolo writes on the effects a likely implementation of a dividend tax will have.**
Dividend taxes discourage investment by reducing the return on equity capital. This is particularly problematic in a developing economy such as Namibia’s, which relies heavily on private investment to stimulate job creation, industrialisation, and innovation. According to the World Bank’s Doing Business reports (2020), economies that have introduced high dividend taxes have witnessed a slowdown in business confidence and foreign direct investment (FDI).
Furthermore, empirical studies show that dividend taxation often leads to capital flight and tax avoidance, especially in economies with limited investment incentives. Namibia already has a high overall tax burden compared to both global and regional peers. The top marginal personal income tax rate in Namibia stands at 37%, while corporate income tax remains fixed at 32% for non-mining entities. When compared to neighbouring Botswana (22%) and Zambia (30%), Namibia is significantly less competitive in attracting capital.
Moreover, it is important to highlight that dividend tax is effectively a second tax on the same profit. After a company pays corporate income tax on its profits, any dividends distributed to shareholders are subject to further taxation.
*Jason Nangolo writes on the effects a likely implementation of a dividend tax will have.**
