Mid-Term Budget Preview: Analysts skeptical of Finance Ministry’s projected revenue increases
The Minister of Finance, Hon Calle Schlettwein will deliver the Mid-Term budget review for 2018/19 on 24 October and Simonis Storms Securities (SSS) economic analysts are skeptical that the ministry will collect the increases in revenue projected.
This view by the analysts is based largely on the fact that firms within the Construction, Agriculture and Mining sectors continue to lay off a substantial number of people as financial stress intensifies. Thus, SSS expects revenue to undershoot to N$54.3 billion (2018/19), N$52.9 billion (2019/20) and N$53.6 billion (2020/21).
The analysts further said that its lower projections are underpinned by expected sluggish Value Added Tax (VAT) collection as spending subsides, and declining income taxes on individuals and companies.
Earlier this year, during his annual budget review for 2018/19, Schlettwein reduced expenditure, reaffirmed the fiscal consolidation stance, adjusted certain tax rates and increased sin taxes to enhance the tax revenue collection. SSS expects the minister to give clarity on the proposed amendments in the annual budget.
Moreover, taxes on products recorded a contraction of 5.6% in the first half of 2018. This, SSS attributes to sluggish consumer spending and declining consumer confidence which led to low consumption of good and services. VAT collections are expected to decline by 3.0% for the period 2018/19.
Furthermore, the Ministry of Finance’s projected increase of 4.6% on Taxes on income and profits from 2017/18 to 2018/19 is deemed aggressive as economic conditions remain tough, with most corporate profits deteriorating.
SSS further added that the SACU region remains vulnerable to external shocks, adding that they do not expect a significant turnaround over the medium term.
“We would expect to hear developments around improvements on tax collections (leakage), i.e Progress on the introduction of the Namibian Revenue Agency. Further sin taxes and fuel levies may be on the cards as well. Although, we are of the view that these will exacerbate the already dire consumer position. Our GDP growth expectations remain 0.6% and 1.8% for 2018 and 2019 respectively,” SSS said.