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Government should consider additional measures in consolidating the budget- expert

Government should consider additional measures in consolidating the budget- expert

Following the presentation of the fourth Mid-year Budget Review a fortnight ago by the Minister of Finance, Hon Calle Schlettwein, Research Associate at the Economic Association Klaus Schade has said there are urgent measures government could consider in consolidating the budget.

While there are a number of factors that are beyond control, Schade said there are others that can be influenced and have to be addressed more forcefully, as they will not only cut expenditure or increase revenue, but also address issues such as inequality.

He stressed that government could consider to raise the tax threshold and reduce the tax rate for the lowest income brackets and to adjust these tax brackets for inflation (fiscal drag), while ensuring that these measures remain tax neutral for the highest income brackets.

“In addition, withholding taxes on interests earned on the Basic Bank Account could be abolished, since this bank account caters for persons earning less than N$2 000 per month. Both measures would bring some relief for low-income earners,” Schade said.

He added that decisive action has to be taken to address issues that have been on the table for many years, stressing that improving the business and investment climate can attract domestic and foreign direct investment, create jobs and income for the employed in terms of salaries and for Government in terms of taxes.

“The Minister of Finance made repeatedly reference to the need to improve our competitiveness. The recently released Global Competitiveness Report and the Doing Business Report both clearly indicate that there is room for improvement. Although becoming the most competitive economy in Africa has been a national priority since some time, very little has actually happened and consequently, Namibia is losing ground,” Schade said.

He said it is necessary to thoroughly review the structure of the public sector that consists of more than 600 entities including Offices, Ministries, Agencies, Public Enterprises, Traditional Authorities, Councils, Appeal Committees, Boards, etc.

There is most likely room to streamline the structure and reduce the financial burden. Natural attrition alone will not address these structural issues. Strengthening regional cooperation and align responses to the current economic challenges could result in synergies and stimulate regional and domestic economic growth,” he stressed.

Meanwhile, mid-year revenue outturn amounted to 51% of projected revenue for the Financial Year 2018/19 despite declining SACU transfers, a drop in VAT and increasing tax arrears, while tax arrears still amount to N$3 billion despite a tax amnesty that was offered.


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