WINDHOEK – The Minister of Finance Saara Kuugongelwa-Amadhila says the country is not overly dependent on revenue from the Southern African Customs Union (SACU).
She says the problems which SACU experienced, especially during the time of the global economic crisis, did present destabilizing threats to the national budget. She made the remarks in the National Assembly on Monday during the finance ministry’s budget allocation debate.
“SACU’s importance in terms of the ratio of the income coming from SACU has been on a declining trend and that is good for us as a country, because it shows that we are not overly dependent on revenue from SACU,” explained the finance minister. Two parliamentarians, Nahas Angula and Ignatius Shixwameni, wanted to know how the country would generate its own revenue in light of the declining SACU revenue. “Looking on the revenue side, about 30 percent of our revenue comes from SACU and about 20 percent from personal income tax. This means that the production sector is not really making much of a contribution,” said a worried Angula, who is also the Minister of Defence. Angula further wanted to know what plans the finance ministry has in place to ensure the production sectors such as mines, fisheries and agriculture would make a meaningful contribution to the budget.
On his part, Shixwameni asked whether there are any strategies in place to replace the income government receives from SACU. “I am asking this because I see our revenue from SACU is decreasing, therefore I expect us to have come up with an alternative,” Shixwameni said. “About three or four years ago when the SACU pool was negatively influenced by the global economic crisis and we had an adjustment that required us to pay back part of the receipts we received in the previous year, our share went down from N$8 billion to N$3 billion in one year. During that year we were able to increase our budget by close to 20 percent, meaning we are not so susceptible that when there is a problem at SACU the budget is destabilised,” she informed fellow MPs.
She said the economic crisis and Namibia’s decreased share of SACU revenue did not affect the country so much, because “we already started with the revenue reforms that enabled us to increase our collection from inland sources.”
Kuugongelwa-Amadhila however remains hopeful that when all reforms are implemented and a dedicated semi-autonomous tax office is established, local revenue collection would increase its share as a proportion of the Gross Domestic Product (GDP). “Although these reforms are important, we need to take solace from the fact that the revenue as a share of the GDP is increasing. Not only increasing in absolute terms, but as a share of revenue, something you hardly find in most countries. In that regard we are doing relatively well,” she said. Kuugongelwa-Amadhila also warned that government needs to manage its wage bill or else it could find itself facing serious problems.
“If we can address issues of the public wage bill it will be good. But if we continue to collect resources for salaries then we will have a big problem,” she warned.
The taxes from Pay As You Earn (PAYE) and taxes from the profits of companies are derived from incomes of companies and employees in different sectors of the economy whether in agriculture or mining. She said there are sectors that can contribute more while some measures have been instituted to address the existing anomalies, such as the export levy on raw materials. “I am also hoping that when our value addition policy is implemented, we will encourage more value to be added to the economy by having increased processing at home. This will not only create jobs and contribute to tax revenue through pay as you earn, but it will also increase earnings from corporate tax,” she said.
Kuugongelwa-Amadhila stressed that there is a need to broaden the economic base in order to broaden the revenue base. “Without increasing tax rates, you can only increase revenue if you broaden the base from which you charge your taxes. That will not only require increased resource allocation, but also improve efficiency in the use of resources, which should include both the improved targeting of resources and the reduction of wastage,” she said.
By Mathias Haufiku