Milking the taxpayer dry
An in-depth analysis on the new income tax draft bill, which is currently being circulated for consultation, has sounded a series of alarm bells, given that Namibia currently has one of the highest tax-to-GDP ratios in the world.
At present, this ratio, as calculated by the World Bank, stands at 28.5%, and ranks fifth highest in the world.
The bill proposes to close all loopholes by phasing out preferential treatment currently being enjoyed by businesses. It will also scrap certain exemptions, introduce withholding tax on dividends paid to Namibians and reduce tax rates for low-income-earners, while creating new upper tax brackets.
It goes without saying that Namibian families are suffering, so tax relief for the poor is welcome.
However, analysts have warned the overall impact of throttling the private sector with further taxes will likely have a double-whammy effect on fiscal consolidation, as lower revenue collection will result in a wider budget deficit, and thus debt uptake, on a lower GDP number.
They have further argued that a large amount of the fall in revenue is likely to stem from reduced employment, as marginal businesses will likely have little choice but to close their doors or cut back on costs, such as labour.
“Households have less money, which results in less consumption and investment, which results in less revenue for government which, if these tax proposals are anything to go by, results in higher taxes, and the circle continues,” the analysis compiled by Rowland Brown of Cirrus Capital and Heinrich Jansen van Vuuren from Namibia Equity Brokers (NEB) said.
It concludes that the current income tax proposals join a host of economically detrimental policies and laws proposed by government over the past three years.
“Many of these policies are crafted under the guise of helping the poor and improving equality. However, like many such feel-good policies, the proposals defy basic economic principles and will undoubtedly do enormous harm to the already struggling economy.”
A heavy dose of caution is needed.
At present, this ratio, as calculated by the World Bank, stands at 28.5%, and ranks fifth highest in the world.
The bill proposes to close all loopholes by phasing out preferential treatment currently being enjoyed by businesses. It will also scrap certain exemptions, introduce withholding tax on dividends paid to Namibians and reduce tax rates for low-income-earners, while creating new upper tax brackets.
It goes without saying that Namibian families are suffering, so tax relief for the poor is welcome.
However, analysts have warned the overall impact of throttling the private sector with further taxes will likely have a double-whammy effect on fiscal consolidation, as lower revenue collection will result in a wider budget deficit, and thus debt uptake, on a lower GDP number.
They have further argued that a large amount of the fall in revenue is likely to stem from reduced employment, as marginal businesses will likely have little choice but to close their doors or cut back on costs, such as labour.
“Households have less money, which results in less consumption and investment, which results in less revenue for government which, if these tax proposals are anything to go by, results in higher taxes, and the circle continues,” the analysis compiled by Rowland Brown of Cirrus Capital and Heinrich Jansen van Vuuren from Namibia Equity Brokers (NEB) said.
It concludes that the current income tax proposals join a host of economically detrimental policies and laws proposed by government over the past three years.
“Many of these policies are crafted under the guise of helping the poor and improving equality. However, like many such feel-good policies, the proposals defy basic economic principles and will undoubtedly do enormous harm to the already struggling economy.”
A heavy dose of caution is needed.
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