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Opinion - Basic Income Grant is cost-effective 

2020-10-30  Staff Reporter

Opinion - Basic Income Grant is cost-effective 
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The Basic Income Grant (BIG) coalition welcomes the news that government is considering the implementation of an income grant. This represents a significant step toward realising a basic income grant for all Namibians.
While we welcome the support, we would like to make some responses to the story. 
The story in the New Era, dated 27 October, speaks of an employment-based grant. One of the most important reasons that a BIG is cost-effective is because of the universal nature. 

Universality means everyone between the ages of 19- 65 receives an income grant, and there is not a ministry full of accountants required to add people to the list every month, take people off, verify statuses and so forth. Giving everyone a grant makes the programme corruption-proof and cost-effective. 
In Namibia, just because you are employed does not mean you are making ends meet. How many people are dependent on that breadwinner? Not only will N$500 help that person but it will drastically reduce the pressure upon them to provide, as family members now have access to a BIG.

We are convinced that N$500 is affordable to government. The real cost of BIG is N$13 billion as estimated by some economists. It would only be about N$4 billion 5.5% of the national budget. The actual gross costs for BIG would be N$6.85 billion or 9.4% of the current national budget and about 4% of the GDP if calculated at a rate of N$500 per person per month.

The real cost would be derived from the taxes paid on the actual gross costs. This is undoubtedly a substantial amount, but one needs to keep in mind that government will recover part of this expenditure almost immediately.
Universal BIG would not only address poverty but also provide an effective economic stimulus “from below”. If all Namibian children from birth until their 18th birthday are covered by the universal child grant, all Namibians from 18 to 59 would be eligible to receive the BIG. The only exceptions would be the recipients of the veterans’ grant (about 20 000 people) and those receiving the disability grant (about 41 000 people) since they already receive state grants, leaving the total number of people to receive BIG at about 1.14 million.

  When considering the initial costs of BIG, the net costs are substantially lower for two principal reasons: firstly, parts of the BIG costs will be recovered through VAT, as the recipients of the grant will use some of the money to purchase goods and services on which VAT is levied, with the result that around 10% of the BIG payments will be recovered through VAT; secondly, about 300 000 Namibians earn above the personal income tax threshold of N$50 000 per year.

  The BIG will be paid to all of them but can be recovered easily through income tax adjustments. Also, high-income earners could be taxed slightly higher to achieve a redistributive effect in favour of low-income earners, provided that the finance ministry registers income taxpayers efficiently, about 25-30% of the BIG payment can be recovered through personal income tax payments.

A universal BIG would lead to improved educational outcomes, improved health and nutrition, as well as lower crime rates. All these were empirically proven not only during the pilot project in Otjivero, Omaheke region but also in international cases such as in India and Brazil. BIG cost calculations show that despite Namibia’s current economic difficulties, a universal BIG is indeed affordable and will provide a much-needed economic stimulus and an effective anti-poverty measure.

2020-10-30  Staff Reporter

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