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Opinion - National internship and youth tax incentive programme

2024-06-28  Correspondent

Opinion - National internship and youth tax incentive programme

Internships in Namibia are not a new phenomenon; indeed, many Namibian enterprises annually embrace interns by extending coveted internship opportunities to both students and graduates. 

Nevertheless, the realm of internships has long grappled with challenges, primarily stemming from the formidable costs associated with providing these invaluable opportunities.

Traditionally, the onus of hosting interns has predominantly rested upon employers, who gallantly shoulder the responsibility of providing a stipend or monthly allowance to their eager interns. 

Despite the financial constraints faced by some employers, they consistently take in interns who are ardent in their quest for experience and in meeting academic prerequisites. 

Currently, the demand for internship opportunities far surpass the available opportunities, rendering internships a formidable challenge for many aspiring graduates and students

Internships have transformed into a pivotal conduit linking fresh graduates to the ever-evolving landscape of employment. Recognising this pivotal role, the Namibian government has embarked on a noble initiative aimed at empowering the vibrant youth of Namibia by endowing them with the invaluable chance to acquire practical skills, industrial, professional  and real-world experience to transition in the world of work. 

This intervention will address the challenge of the youth not having the requisite work experience to apply for entrance vacancies in companies in the long run.

In August 2023, Cabinet approved the introduction of a tax incentive, designed to complement the endeavours of employers in furnishing these much-sought-after opportunities. Subsequently, during the mid-year budget review in October of the same year, the Minister of Finance and Public Enterprises, Ipumbu Shiimi, unveiled a youth employment tax incentive for the fiscal year 2024/25, earmarking a substantial sum of N$126 million to create approximately 5 075 internship opportunities within the same financial year. 

This implies the government is granting a tax subsidy to employers capped at N$50 000 per annum for an intern. 

The intended purpose of the National Internship Programme and Youth Tax Incentive is to empower employers to onboard an increased cohort of interns in exchange for a tax subsidy. 

This tax incentive reduces an employer’s cost of hiring young people through a cost-sharing mechanism with the government, while leaving the wage that the intern receives unaffected. 

To encourage skills development and transitioning in the world of work, the youth tax incentive provides employers with an additional tax deduction over and above the normal tax that can be deducted. 

To claim the allowance, the employer and the intern must enter a formal internship contract. The tax amendment introducing the internship subsidy results in a lower corporate tax payable by such employers, without having to wait for refunds.

To facilitate the seamless implementation of this laudable incentive, the Ministry of Finance and Public Enterprises is diligently finalising amendments to the Income Tax Act of 1981. Through these forthcoming amendments, the ministry will introduce additional deductions (corporate tax) for employers who welcome interns into their fold and will establish designated authorities tasked with overseeing internships within their respective industry sectors. 

Once these designated bodies are identified, employers will be duly apprised of the necessary processes and guided accordingly. 

While awaiting the fruition of the amendments to the tax legislation, employers are encouraged to take in interns into their organizations in accordance with their established company policies and recruitment procedures. 

The anticipated tax benefits will come into effect in the employer’s 2024/2025 financial year tax submission. Furthermore, employers are kindly urged to maintain meticulous records of their interns, encompassing their names, ID numbers, internship durations, and succinct reports on the internship programme, which will be tendered to the designated oversight bodies upon their formal authorization.

Internship programme is earmarked for school leavers, graduates from TVET and Higher Education Institutions and candidates seeking registration with professional bodies. 

This intervention consists of two phases, phase 1 is aimed at the private sector and public enterprises in a tax paying position and the second phase is aimed at Government, NGOs and non-commercial public enterprises.

The internship programme is poised to yield a plethora of benefits for employers, including the infusion of fresh perspectives and innovative ideas from the interns/graduates, heightened productivity, a more equitable distribution of workloads among employees, and the potential identification of future employees, thereby streamlining recruitment efforts and saving precious time. 

For the interns, these opportunities promise an enhanced likelihood of securing gainful employment, a rich tapestry of work experience in a genuine professional setting, and the chance to cultivate invaluable professional networks crucial for their future endeavours. 

The Namibia Investment Promotion and Development Board (NIPDB) is collaborating with the Ministry of Finance and Public Enterprises, lending their unwavering support to the successful implementation of this noble initiative. Employers seeking further information or desiring to partake in this programme are encouraged to reach out to the NIPDB for invaluable information and support. 

Moreover, employer associations are earnestly implored to disseminate information regarding this esteemed initiative among their esteemed members and to engage the NIPDB for enlightening presentations as the need arises.

Authors: Julia Muetudhana - Executive Talent Innovation and Productivity at NIPDB; Oscar Capelao - Deputy Executive Director at Ministry of Finance and Public Enterprises; Ian Gischeru - Senior Consultant Talent Innovation and Productivity at NIPDB

2024-06-28  Correspondent

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