Search
Friday 19 July 2019
  • :
  • :

Calle talks of tax reforms

  • Introduction of presumptive tax on small units
  • Abolishment of various income tax and VAT exemptions
  • Namibia Revenue  Agency Bill to be tabled by February 2017

Cale

Wide-ranging tax changes and additional taxes are likely to be introduced next year when Finance Minister Calle Schlettwein tables the national budget, he signalled yesterday in his medium-term budget policy statement.
Schlettwein announced the revised revenue forecast for the current fiscal year, saying the revenue is expected to fall short of forecast levels by approximately 9.0% or some N$6.23 billion due to the sharp reduction in economic activity.
“During the coming budget, it is my intention to table the tax proposal for the introduction of the presumptive tax on small units, proposals to eliminate various categories of tax exemptions, both of VAT and income taxes as well as tax deductability of some items not related to cost of production such as the resource rent,” he announced this when he tabled the Mid-Term Budget Review were tabled in the National Assembly yesterday.
Schlettwein further stated that he also intends to redesign the proposals for Solidarity Wealth Tax into a high income-based Wealth Tax, coupled with further expansion and strengthening the provisions of Capital Gains Tax.
The minister had to do a fine balancing act on his hands, on the one hand he had to make sure that budget cuts did not affect critical development projects.
“The review introduces stronger fiscal consolidation measures and discounts against short-term unsustainable gains in favour of long-term sustainable outcomes as well as intergenerational equity. Such deeper fiscal consolidation will be accompanied by a package of supportive policy interventions to smoothen the impact of the adjustment on growth and social welfare. We believe that budget consolidation and economic growth are two sides of the same coin,” he said.
He said the development budget expenditure will be cut by N$2.7 billion, with about 11% of the cut due from projects that have not been implemented, and others from projects that have to be phased over the MTEF.
Given the tight fiscal squeeze, Schlettwein said: “The cuts mainly concentrated on the construction of office blocks or extensions, with more bias towards administrative sector than social sectors. Defence was affected the most in this case.”
He said the consolidation framework was solely to place the country’s public finances on a sound, prudent and sustainable path.
“It is balanced consolidation adjustment, with a supportive policy package to enhance efficiencies and quality of spending and cushion the adverse impact of expenditure cuts on growth and service delivery.”
Commenting on the mid-term review, Simonis Storm said: “The Namibian economy is caught in an unfortunate quadrant of an uncoordinated policy mix which do not support growth.
“We believe that the commitment to fiscal consolidation since the previous mid-term budget review and the subsequent decision to cut spending on capital projects in an attempt to safeguard the country’s fiscal prudency, was partly reinforced by a fiscal squeeze,” it said.
The company also believes that tax reforms will not have an immediate effect on the improvement of Government revenue.
“Given that the ministry has already implemented stricter or rather prudent financial management measures in September, one of which is to halt expenditures on all capital projects, and that payments for all ministries are now processed at the main office, we don’t expect an announcement on additional cost-cutting measures as this is likely to put the economy on an even lower growth path (Government spending contributed 45% of GDP in 2015),” it noted.
Regarding the broader agenda for domestic resources mobilisation, Regulation 28 will be amended to lift the threshold for local asset requirement from the current 35% of total assets to about 50% through a phased process, announced Schlettwein.
“This will be undertaken in line with the initiatives in the Financial Sector Strategy to develop the domestic market alongside actions to grow bankable asset classes to accommodate the inflow of funds.”
Schlettwein called on the private sector and the financial services industry to leverage opportunities for project financing.

The key spending priorities for the FY2017/18:

  • Safeguard macroeconomic stability and address sovereign ratings weaknesses by ensuring fiscal prudence, policy coordination and implementing a much deeper but balanced fiscal adjustment path, based on reinforced reduction of non-priority recurrent spending.
  • Leverage alternative sources of financing to reduce over-reliance on the national budget through a balanced approach to utilisation of domestic asset requirements, Public, Private Partnerships and engaging the private sector in projects with potential revenue and profit generation.
  • Promoting inclusive economic growth and job creation by increasing investment in public infrastructure in the priority sectors of the economy through off-budget financing of priority projects.
  • Promoting industrial development and optimising the value obtained from natural resources.
  • Protecting productive expenditure in the social sectors of education, health and skills development, and
  • Mobilising domestic resources and implementing supportive policies and structural reforms to bolster the competitiveness of the national economy and attracting investment.



Leave a Reply

Your email address will not be published. Required fields are marked *