Economist questions Govt’s commitment to tax reforms
Although total revenue and grants are forecast to rise from N$26.8 billion in 2011/12 to N$35.4 billion in the 2012/13 budget, economist Robin Sherbourne has questioned government’s commitment to tax reforms that will ensure that the tax take increases.
The Minister of Finance, Saara Kuungogelwa-Amadhila promised last year that government will introduce new taxes to “deepen and diversify the revenue base, promote domestic value addition and distribute wealth and promote social welfare”.
But failure to introduce significant new taxes and tax reforms almost a year after they were promised, has led to Sherbourne questioning government’s commitment. He said: “One worrying development is that actual revenues in 2011/12 appear to be significantly lower than forecast in March 2011. While SACU revenues are known in advance and taxes on goods and services performed better than expected, the third big chunk of revenue – taxes on income and profits – is coming in at 14.8% behind target with personal income tax, mining and non-mining corporate tax all contributing to the shortfall.
“Overall revenues and grants are 4.1% lower than expected, an unusual situation given that the Ministry of Finance generally underestimates revenue. This casts doubt on the robustness of revenue forecasts going forward. It also suggests that the Ministry’s claim of greater effectiveness in tax administration lacks hard evidence.”
Sherbourne said the long-proclaimed intention to raise non-tax revenue also appears unfulfilled. Non-tax revenue is set to remain almost constant in nominal terms between 2007/08 and 2014/15 at around N$1.5 billion.
The independent economist was also sceptical about some of the new tax reforms that were approved by parliament in 2011 such as the introduction of a withholding tax on fees paid to non-residents, an increase in Non-Resident Shareholders Tax (NRST) and taxes on income from the alienation of mineral rights as well as amendments to VAT, Stamp Duty and Transfer Duty.
“The rationale behind some of these tax initiatives is clear but the extremely broad nature of the new withholding tax will raise the cost of investing in new projects in Namibia (which are often dependent on outside professionals) and are likely to result in Treaty Shopping as investors seek to channel their activities through countries which have double taxation agreements with Namibia. The rationale for penalising minority shareholders does not seem to be particularly well thought through.”
Sherbourne added that Namibia’s continued dependence on SACU revenue augers badly for the upcoming negotiations over a new Revenue Sharing Formula “where the bottom line is that generous SACU payments to the BLNS will have to be dropped in order to accommodate new SACU members and fulfill the aim of using SACU as the building block of future regional integration.”