WINDHOEK – While Namibia is the only country within the Southern Development Community (SADC) that has no independent revenue office, Finance Minister, Calle Schlettwein, has warned that a country does not just establish an independent revenue office because it has become fashionable.
Responding to questions during discussions of the 2015/16 Appropriation Bill and the Medium Term Expenditure Framework (MTEF), Schlettwein emphasized that establishing an autonomous revenue office is for achieving well-defined national objectives.
The Finance Minister revealed that a decision has been taken to establish an independent revenue office and a task team dealing with the matter is formulating the policy framework and other transitional arrangements over an expressed timeline. “When a comparison is made against other jurisdictions, the focus should be on the overall outcomes such as the operational efficiency and revenue productivity of the tax administration system measured by the ratio of revenue to GDP (Gross Domestic Product). Our revenue-to-GDP ratio stood at 32.0 percent in 2013/14, even at the time when government made substantial tax rate cuts,” said Schlettwein.
He added that during the past 25 years, the Namibian economy expanded by a factor of 15, while revenue increased by a factor of 20 over the same period. This, he said, confirmed the strong elasticity of the tax system and buoyancy of tax administration measures undertaken over time. “The tax policy and administration reforms that have been initiated in recent years have served the country well,” remarked Schlettwein.
Among the reforms implemented to date are the segmentation of taxpayers and the establishment of specialised offices, such as the Large Taxpayers Office, the Small and Medium-sized Taxpayers Office and Special Investigations Unit within the Receiver of Revenue.
“Contrary to the pessimistic view by some members of the House, the feedback that we receive from the business community is that these innovations have improved the delivery of taxpayer services. And, we remain committed to future improvements,” added the Finance Minister.
During the discussions on the national budget in Parliament, Schlettwein also touched on issues surrounding the outlook of Southern African Customs Union (SACU) revenues and domestic revenue policies.
He noted that government has on many occasions expressed the importance of SACU in the regional integration and industrial development agendas. “We have taken into account the projected outlook on SACU revenues, which is based on a fairly dynamic revenue sharing formula.
The formula is driven by factors, such as the extent to which member states import from within SACU and the growth in GDP of member states,” said Schletwein.
He added that the fact that Namibia, along with the other smaller member states, imports more from South Africa than South Africa imports from the rest of the common customs area, creates the impression that smaller member states benefit excessively from the customs pool to the detriment of South Africa.
“However, we must recognize that South Africa, on its part, is granting substantial customs rebates to some of its industries and this makes a considerable dent into the customs pool available for distribution to member states.
We are facing a complex situation at the moment, and I intend giving a more elaborate explanation on the SACU dynamics to this august house in due course.
Domestic revenue mobilisation, on the other hand, is an integral part of the on-going tax policy and administration reforms, whose details are provided in the budget statement,” noted Schlettwein.
Schlettwein also addressed a question by DTA Member of Parliament, Nico Smit, who expressed concern that the growth in GDP in nominal terms was reduced from the previous MTEF to the current MTEF. “In this regard, I would like to state that the nominal GDP is influenced by two factors, namely real growth of the economy, on the one hand, and inflation, on the other hand. While we know that our economy is growing in real terms, the GDP inflator slowed down due to low domestic inflation as well as low prices of the commodities that we produce, especially minerals.
However, I wish to refer the Hon. Member to the Fiscal Strategy which contains detailed assumption on which GDP projections are based,” noted Schlettwein.
Smit also expressed concern about the consistent exchange rate depreciation that Namibia experienced since 2012.
“As a member of the Common Monetary Area and as a small open economy there is very little we can do to influence or reverse the deteriorating strength of our currency.
The only way to shield ourselves against the impact of the exchange rate depreciation is to avoid borrowing in foreign currency, to reduce our dependency,” noted Schlettwein.