Increased tax threshold to benefitordinary Namibians
Finance Minister Saara Kuugongelwa-Amadhila tabled the annual national budget last month amid a myriad of pressure emanating from the country’s economic performance that has seen a sharp rise in inflation, the cost of property and the unemployment rate.
Expectations from the ordinary man on the streets that the budget would present them with more spending power were rife. Thus, their dreams were made a reality when the tax exemption and deduction figures were announced.
Kuugongelwa-Amadhila who has been under a lot of pressure from observers to save the ordinary Namibian, has increased the threshold of income tax exemption from N$40 000 to N$50 000 a year. This will leave Namibians earning below the tax threshold with N$1.2b more in their pockets.
According to the Government’s latest expenditure plan all people who are exempted from paying taxes are worth 1.2b.
Commentators lauded the minister. Old Mutual Namibia (OMN)’s Lionel Mathews even suggested that people send a bouquet of flowers to the minister for this gesture.
“In this budget, we have increased the incentives to create employment. We have chosen to decrease the burden of taxes and given our families and pensioners more support. While the approach in recent years was to stimulate economic activity by expanding public spending, we have now chosen to reassure people, boost their confidence and give the private sector some space to contribute towards economic expansion and job-creation,” justified the Finance Minister at a budget review luncheon hosted by KPMG, Prime Focus Magazine and the Namibia Chamber of Commerce and Industry (NCCI).
Many analysts have described the tax relief as a good move that will increase the spending power of ordinary Namibians thereby stimulating the economic growth.
However, the minister cautioned that these savings should not end up in personal luxury expenditure nor should the private sector hike its prices to gobble them up.
The director general of the National Planning Commission (NPC), Tom Alweendo said; “There is now a way to build a viable economy without spending. We need to spend more on infrastructure and pay taxes for our development. There is need to strike a good balance that will be able to answer the question about how the tax concession will affect the ordinary man on the street.”
Alweendo further stated, for Namibia to attain the Vision 2030 goals, an average growth of seven percent is needed but that can only be achieved if stakeholders play a role.
The minimum income tax rate that was previously at 27% will now be 18% – to be at par with South Africa’s. The average tax rate of 34% for high income-earners will now drop to an average of 28%.
Kuugongelwa-Amadhila justified her stance as based on an analysis made on tax returns.
“We did an analysis based on the results of tax returns. If we look at the maximum rate of two percent, it would take a total taxation of royalty that’s based in Botswana. Whenever there is a reform, we often look at it in isolation and we end up going back to it as time goes on. The carbon tax emission will discourage consumers from environmental pollution,” she explained.
“If for instance, your car is polluting the air so much, then it will encourage you to buy a new car that that is environmentally friendly,” she added in reference to the carbon tax emission.
Former NCCI president and renowned financial expert who is also the founding executive chairman of the Hangala Group - Leake Hangala - stressed the need for the ordinary Namibian to be financially empowered because life has become very expensive.
“This is not an expansionary budget. This is a small budget and we need massive investment. In terms of the tax, we need to have a clear strategy that when we spend, we will not increase deficit. One has to bring in money to the hands of the people because life is becoming very expensive,” asserted Hangala.
James Cummings of the Simonis Storm Securities expressed optimism that increased consumer spending will stimulate the economy.
“When the budget was tabled, we did calculations between the old and the new and discovered that it has increased by 20%. An increase in consumer spending will stimulate the growth of the nation. This would mean that for every N$1 spent, the economy will increase by N$3. Investment in infrastructure is very important, as property is still very expensive. Plus, it has to be more efficient and cost-effective,” he suggested.
Cummings also pointed out; due to the increased tax threshold, there will be increased revenue. He also highlighted; there will be job-creation due to the increased expenditure in key sectors.
All things considered, the common man will undoubtedly benefit through these changes in taxation - both directly and indirectly. This is because direct taxation impact involves changes in income tax exemptions and deductions and many would pin their hopes on such prospects. PF