Windhoek
Government will continue with public consultations on the proposed introduction of a Solidarity Tax during the year, with a view to developing a detailed tax scheme.
Minister of Finance Calle Schlettwein yesterday said the proposed Solidarity Tax is not a tax base-broadening measure, but rather a redistributive tax with a relatively high tax threshold.
“The Solidarity Tax will be a progressive, redistributive tax which will contribute to the reduction of income inequalities and take into consideration the income levels and the ability to pay,” Schlettwein said when he tabled a N$66 billion national budget, representing 34.9 percent of the country’s Gross Domestic Product (GDP) – a one percent reduction in comparison to the 2015/16 budget.
During his budget speech during an unusually subdued mood in parliament Schlettwein noted that while the country has made progress in reducing income inequality (from the Gini Coeffient of 0.7 to 0.597 in 2009/10) Namibia has significantly high income inequalities and a high concentration of wealth in the hands of a few.
“As I have stated, the proceeds of the (solidarity) tax will accrue to a designated fund, which attracts a separate audit and parliamentary approval. I have established a task team that will also comprise independent tax experts to formulate a White Paper on the specific tax proposal and its modalities. This concept paper will form the basis for finalising the consultations and formulating the tax proposal,” he explained.
Meanwhile, taking into account sales volumes and targets set for the total tax burden on excisable commodities, so-called “Sin Taxes” have been increased by between 6 and 8 percent. For instance, malt beer will increase by 8.5 percent and unfortified wine and sparkling wine will be up by 8 percent, while cigarettes and cigars will increase by 6.7 percent.
Offering his first impression of the national budget, investment strategist at Capricorn Asset Management Suta Kavari said the budget is broadly in line with what they expected.
“The fiscal consolidation was to be expected in light of the tight fiscal position. We welcome the cap in expenditure, although we feel it doesn’t go far enough to address the shortfall in revenue. Of course the increase in old age pensions and the reduction in unproductive expenditure are welcomed,” Kavari said.
“It is a fair budget focusing on debt sustainability and financing projects that have an impact on national development. Concerning the 37 percent debt to GDP ratio, which is above the 35 percent national cap, we feel the percentage is likely to reach 40 percent by the end of this year,” said Frans Uusiku, an economist at Simonis Storm Securities.
Schlettwein said government’s focus is not only on broadening and deepening the tax base, but also to make the tax system more progressive to positively contribute to the social objectives of reducing income inequality.
“We understand that the proposed Solidarity Tax is not fully understood by various sections of society. Therefore, this and other high-impact programmes for targeted funding from this tax need to be well defined.
“We shall, therefore, continue to engage the public on the specific tax proposal for a broader understanding on the benefits, principles and administrative arrangements for this national intervention,” the finance minister noted.