By Petronella Sibeene WINDHOEK Local economists have said the Government's stance to stamp out tax on a limited number of food items is the best plan the State could have taken. However, the decision that tilts towards providing relief and assistance to low-income earners and those continuing to be adversely affected by the rising food prices was received with mixed feelings. While the idea is to cushion the harshness of the impact of the international turbulence on most Namibians, particularly low-income families, who invariably are impacted first and most acutely, some sections of society feel more items could have been included on the list. Talking to New Era, local economist and Chief Executive Officer of RMB Asset Management Namibia, Martin Mwinga, said the Government can only do so little for now as the situation was not expected to last that long. "Abolishing of VAT on some foodstuffs will provide relief for many low and middle income people but broadening the list could have posed a revenue dilemma for the Government," he added. This intervention by the Government, supported Acting Director of the Namibian Economic Policy Research Unit (NEPRU), Klaus Schade, comes at a cost. "It means the Government will lose income and might not be able to address other issues in the social sectors. It might also face increased debts," he added. Dr Omu Kakujaha-Matundu, University of Namibia Faculty of Economics and Management Science Deputy Dean, embraces the Government's decision, adding that it was long overdue. He echoed what the other two economists has said, adding that if the food item list was made longer, the Government would have been forced to either cut on expenditure by putting on hold some capital projects or it could also borrow and pay later dearly. Schade said coming up with the list must have been a challenge for the Government especially since such a decision demands a survey such as the national household survey to determine what most households consume. Thus not every food item could be qualified for tax exemption. "If everyone was to choose what item they eat or not eat, for example have pasta (exempted) and not beans, it would be difficult for the Government to draw the line. We should take into account social realities," Schade argues. High food prices coupled with high fuel prices and inflation continue to have negative effects on most households. Cooking oil, fat, cake flour, bread are all essential food items in most homes but the deputy dean wonders as to why beans and not another item was chosen. Nonetheless, he says, "When prices are high like this, it is not an exaggeration that some people go to bed with empty stomachs. The low income earners will at least have relief." Kakujaha-Matundu further says operations of some small businesses were threatened by the skyrocketing food prices, as the profit margins were depressing. "A lady selling fat cakes would have gone out of business because of high food prices and low profit. "With no tax on cooking oil and flour, these women can continue with their businesses," said Kakujaha-Matundu. He added the initiative would also stabilise the price of bread at bakeries. Kakujaha-Matundu also cautions the Government of some scrupulous businesspeople that might not implement the measures once the Government gives the green light. Thus monitoring should be effected as well, he says. He also commended the Government for the initiative to support school feeding programmes, adding that most children at most Government schools hail from poor families. "This will reduce pressure on families," he emphasised. While the Government intervention has brought relief to many, Schade says the huge discrepancies in income distribution in the country still places the poor at a disadvantage. Because of that, he explained that the vulnerable in society might not necessarily benefit from some of the solutions as provided by the Government. For example, rich people will always afford a loaf of bread while the poor might not and thus tax elimination imposed on bread might not necessarily change the situation of the poor. "Government could have applied an alternative intervention that would strengthen the purchase power of the vulnerable in society," he suggested. Meanwhile, Minister of Finance, Saara Kuugongelwa-Amadhila, yesterday tabled the amendment to the VAT Act. This comes two days after the Head of State urged members of parliament to swiftly work on the Bill to speed the implementation of the decisions taken.
2008-06-20 00:00:00 10 years ago