… Presumptive tax introduction expected
… Namibia’s outlook risky:IMF
… Lifestyle audits can boost State revenue
All eyes are firmly fixed on finance minister Calle Schlettwein as he prepares to deliver his Budget Policy Statement next week.
Treasury has been under pressure to reduce spending and increase revenue, Namibians should thus prepare for another tough budget.
The budget will lay out how the government plans on spending money and how it plans to fill the gap on any shortfalls.
One of the key highlights to look out for in this year’s budget is how government plans to increase its revenue stream.
Experts are all but certain that Treasury will finally introduce a Presumptive Tax in order to capture income-earners who have not been captured by the tax net.
Ernst&Young Country leader and tax partner Cameron Kotze said South Africa’s decision to hike its VAT rate will not have an impact on Namibian consumers.
“It should have no direct impact, goods should end up here at zero VAT, consumers of those goods will then pay Import VAT which they can reclaim from Inland Revenue,” he explained.
Kotze expects Schlettwein to address the presumptive tax issue.
Presumptive tax, according to Kotze, will be imposed on people who Treasury thinks are not paying taxes but who are generating income, or people rendering services while failing to declare the income and those businesses that are too small to declare.
Kotze’s worries on Presumptive Tax hovers around the collection process.
“How they collect it, is the problem. They need to use bodies such as local authorities where people get licenses to operate as vendors and taxi operators to get the real information,” he said.
On solidarity tax, Kotze does not expect Treasury to follow through with it because “they will merely be collecting taxes more from people who are in the net already.”
Kotze also indicated that Treasury’s robust drive to increase revenues could affect organisations such as schools and churches that use their facilities for commercial purposes outside of their core business as well.
“When you look at organisations such as schools and churches that enjoy tax exemptions yet they conduct business that generate income…is it right to get exemptions while competing with others who pay taxes? Most of them have branched into other things such as renting out facilities on a commercial basis,” Kotze said.
IMF on Namibia
Namibia’s outlook has been described as risky, stemming from possible fiscal slippages that could undermine policy credibility, lower demand for key exports, further declines in SACU revenue, and slower recovery in mining and construction activities.
These were the sentiments of the Executive Board of the International Monetary Fund (IMF) upon conclusion of the Article IV consultation with Namibia.
IMF warned that extensive macro-financial linkages could amplify the negative impact of shocks.
Since 2010, Namibia has experienced a period of exceptional growth. Growth was partly attributable to temporary factors. This was due to an expansionary fiscal policy, the construction of large mines and buoyant credit supported growth and better living standards.
However, robust growth masked rising macroeconomic vulnerabilities and deteriorating productivity performance.
Moreover, structural impediments have contributed to keep unemployment and income inequality unacceptably high.
Kotze said lifestyle audits could be the biggest source of extra revenue.
“People who live in fancy houses and drive cars, do they actually pay their fair share of tax? Treasury must look at these people to see if they pay taxes that represents the wealth they show,” he said.
The litmus test, said Kotze, is whether there will be political will to target well connected individuals.
With Schlettwein trapped between protecting Namibians from South Africa’s recently announced VAT increase and establishing new revenue streams to curtail the revenue shortfall, the Managing Director of Twilight Capital Consulting Mally Likukela said despite the fact that fiscal consolidation is expected to continue, spending in the social sector is expected to continue.
He explained that due to the close linkages between Namibia and South Africa, as well as Namibia’s over-reliance on South Africa when it comes to goods and products, Namibia will be affected.
“Fiscal consolidation will continue, however there will be significant expenditure, particularly in the social sector to fulfil its commitment to free primary education and social grants,” he said.
Likukela said Schlettwein must do something to cushion Namibians from the VAT increase.
He also expects the minister to announce new revenue streams such as the introduction of a Presumptive Tax.
Likukela also expects a deviation from the Harambee Prosperity Plan and the National Development Plan 5.
“A number of projects from these plans will be dropped due to a lack of finances,” he said.