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Naloba suggests tax relief for civil servants

2022-08-03  Aletta Shikololo

Naloba suggests tax relief for civil servants

Aletta Shikololo

Ongwediva - The Namibia Local Business Association has pleaded with government to consider providing tax relief to civil servants, which would help to increase their net salaries on an interim basis until economic challenges have dissipated.

“Naloba advises the government to give back 10% of their tax portion to every civil servant, resulting in an increase on their net salaries on an interim basis,” said vice president of the association, Peter Amadhila.

This is to avoid the looming countrywide strike.

The association asked the government to consider this advice within the next 14 days to give civil servants relief after an overwhelming majority voted last week to go on strike on a date to be announced soon.

Amadhila said the strike will negatively affect crucial institutions such as schools, hospitals and businesses.

“Civil servants could skip their monthly bonds’ payments, resulting in their houses, cars or properties being repossessed by the banks. Many families will be left devastated. The whole country will be left bleeding,” he emphasised.

The association further advised civil servants to refrain from going on strike, but
to rather wait on the government to pronounce itself.

During a media conference on Monday, Amadhila further recommended that the president and Cabinet refrain from travelling out of the country “due to costs, until the situation is solved”.

“Naloba is also suggesting the suspension of parliament’s recess for lawmakers to immediately address the matter without any delays,” he added.

Amadhila said the country has mineral and fishing resources that are of no benefit to the country. “With our resources versus our population, our country was not supposed to be struggling economically. Our debts were supposed to be minimal and every citizen was supposed to have access to a good life,” he stressed, urging the government to summon all mining and fishing companies to invest and rescue the country.

Speaking to New Era, local economist Klaus Schade was of the stance that Naloba’s proposal won’t help low-income earners who earn below the tax threshold of N$50 000 per annum, since they don’t pay income tax.

“Furthermore, since higher income-earners pay more income tax, they would benefit most from the proposed tax refund, while low income-earners in particular would need assistance the most,” he reasoned.

Schade further suggested that government should consider increasing the tax threshold from the current N$50 000 per annum to N$100 000 per annum, and adjust tax brackets and marginal tax rates.

“The current tax threshold and the
income tax brackets have not been adjusted
 for inflation since 2013. Hence, employees might have moved into higher tax brackets with higher marginal tax rates, even if they
 have received salary increments below the inflation rate. These adjustments would reduce income tax payments and leave more disposable income in the pockets of taxpayers,” he noted.

In the same vein, the Namibia Public Workers Union (Napwu)’s secretary general Petrus Nevonga said although Naloba’s suggestion is an attempt by the association to find a possible solution, it does not address the problem for all civil servants.

“We acknowledge their opinion, and it is good because it speaks for the civil servants’ pleas to be solved. But it does not provide a solution to the financial problems of civil servants. With an increment, it creates a better level of affordability. One does not solve the employees’ financial problems by giving cash which does not aim to improve their earning; that does not really solve the problem,” he added.

Nevonga thus requested government to revisit its position in order to avoid any possible strike. “We have tried every possible option, and going on strike is our last resort to finding a solution to the problem,” he stated.

Financial expert Josef Sheehama said tax relief to civil servants would mean a higher level of purchasing power, which would allow them to purchase more goods and services.

“This means their surplus or cash flow improves as a result of tax relief,” he observed.

In addition, he explained, “tax reliefs are inflationary as they increase the demand for products. As a result, if tax relief was met with a corresponding cut to government spending, inflationary pressures would not increase. However, the fundamental purpose of taxation is to raise revenue effectively through measures that suit Namibia’s circumstances and administrative capacity”.

“Therefore, I believe that the government stimulus is inefficient because of the contraction in economic activity, associated with deficit-financed spending. Reforms that improve incentives, reduce existing subsidies, avoid windfall gains and avoid deficit financing will have more auspicious effects on the long-term size of the economy,” he continued.

2022-08-03  Aletta Shikololo

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