2014-03-04Mathias Haufiku "WINDHOEK - Government needs to identify capital projects with high returns, such as investment in transport infrastructure, water and electricity if it is to reduce the ever-increasing budget deficit. Prominent Namibian economist Klaus Schade recently expressed this view. Minister of Finance Saara Kuugongelwa-Amadhila announced last month in parliament when she tabled the 2014/2015 budget that the deficit is projected at N$7.62 billion. “The important thing is that the deficit is used to finance capital expenditure that will yield a return in future, and is not being used to finance operational expenditure such as wages and salaries,” Schade said in response to questions from New Era on the budget. “We need to broaden the tax base and enforce compliance in order to increase revenue. Raising taxes could have the opposite effect, namely reducing revenue because taxpayers might try to avoid paying taxes,” he said. Expenditure needs to be better targeted in order to achieve the overall development objectives of sustainable economic growth, job creation and an increase in income equality. “If we succeed with these objectives we will increase government revenue and can pay off the debt,” said the economist. He also warned that increasing deficits and debts bear the risk of crowding out private sector investment, since the public absorbs the liquidity. When asked how an increasing deficit and debt will affect Namibians, Schade said: “If debt-financed capital projects do not yield the return and result in increasing revenue then government needs to identify additional revenue sources or increase taxes, which will affect private households and the business sector.” Schade however indicated the national debt level was still manageable. The finance minister said government would continue with tax reforms to enhance efficiency, broaden and deepen the revenue base and increase the competitiveness of the tax regime. In recent years Namibia’s tax reforms have been aimed at reducing the level of taxation of all people. “Tax cuts do reduce government revenue in the short term, but are expected to improve the business environment, attract additional investment and subsequently lead to higher revenue because of additional economic activities,” said Schade.. By Mathias Haufiku " 2014-03-04Mathias Haufiku
