The proponents of the universal Basic Income Grant (BIG) say that the real cost of the economic intervention would only be about N$4 billion, or about 5.5% of the national budget and not the astronomical N$13 billion as estimated by some local economists.
According to the Economic and Social Justice Trust, which is spearheading the Basic Income Grant (BIG) Coalition of Namibia, 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,” said chairperson of the trust, Herbert Jauch, who is adamant that a universal BIG would not only address poverty but also provide an effective economic stimulus “from below”.
Jauch explained that 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, thus leaving the total number of people to receive BIG at about 1.14 million.
Jauch continued that 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 though VAT; secondly, about 300 000 Namibians earn above the personal income tax threshold of N$50 000 per year.
Said Jauch: “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 Ministry of Finance registers income tax payers efficiently, about 25-30% of the BIG payment can be recovered though personal income tax payments.”
Jauch added that a universal BIG would lead to improved educational outcomes, improved health and nutrition as well as lower crime rates.
“This all was empirically proven not only during the pilot project in Otjivero, Omaheke region, but also in international cases such as in India and Brazil,” said Jauch.
He concluded that these 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.