“Towards pro-growth fiscal consolidation” – An overview of the 2016/2017 Budget

The annual budget for the 2016/2017 budget was tabled in Parliament yesterday by the Honourable Minister of Finance, Calle Schlettwein.

The following is a brief overview of a few of the notable changes and/or considerations relating to the budget which aspires to achieve “shared prosperity for all”.

The Honourable Minister of Finance announced a total expenditure budget allocation of N$66 billion for the 2016/2017 financial year, which highlights a reduction since the prior budget allocation of N$1,08 billion (N$67, 08 billion for 2015/2016).

The main focus was to limit expenditure without neglecting social responsibility. Four priority focus areas have been established, namely:

• Economic growth and sustainable development;
• Poverty eradication and the improvement of social welfare;
• Progress towards prosperity; and
• Improved delivery of timely, reliable and affordable services to the public.

Highlights:

The following is a list of notable highlights (however not limited) addressed in the annual budget overview:

• On the 3^rd of November 2015, Namibia had its first mid- year Budget Review which is set to continue as a financial management tool and mechanism to relook the budget.
• Access to Tertiary Education will be expanded additionally through formula-based funding and increased financial assistance to students; as well as research and development and vocational training.
• Old Age Pension was increased by N$100 to N$1,100 per month.
• The depreciation of currency is due to drive up the price level of imported goods, combining with drought-related food price increases which will cause inflation to climb (Consumer Price Index reached its lowest level at 3.4% since 2010).
• Public revenue has declined due to contractions from the Southern Africa Customs Union (SACU) and impact of external factors on the domestic economy.

• The following tax proposals will be undertaken during the budget year:
  • Finalization of the approval and implementation process of the environmental and export taxes;
  • Increasing the fuel levy (which has remained constant since 1998);
  • Assessing the feasibility of a presumptive tax on the informal sector, development of a Double Taxation Agreement Policy on matters of illicit trade flows and transfer pricing;
  • The tabling of the Customs Bill which is currently at the legal drafting stage;
  • Development of the Solidarity Tax proposal with the main purpose of reducing income inequalities – a Task Team of tax experts will formulate this proposal;
  • Strengthening of procedures for the recovery of tax debts; and
  • The implementation of the Integrated Tax System.

• The following Sin Tax Percentage increases are applicable retrospectively, effective 24 February 2016:

• There were no further proposals to changes in tax rates for existing direct and indirect taxes.

The Budgetary Provisions for the 2016/2017 financial year are as follows:

Total Expenditure Budget Allocation: N$ 66.00 billion             

Total Revenue Estimation: N$ 57.84 billion                 

Economic growth (as well as future projections) can be summarised as follows: