The solidarity wealth tax will only be directed at the affluent members of society, the ones with high income, and not be applicable to everyone, President Hage Geingob told the business community last night.
“We all know that due to legacy and structural issues, significant income is still concentrated in the hands of a few,” the president told business people who attended the Namibia Chamber of Commerce and Industry (NCCI) presidential business dinner last night. “I would like to encourage you to embrace the notion of solidarity tax,” he said.
The finance minister Calle Schlettwein announced the solidarity tax, which the president introduced during the national dialogue on poverty, to parliament this week saying the finance ministry would undertake further public consultations on the modalities of the tax proposal.
“This tax is still under investigation, and once a proper formula is reached, it will be announced accordingly. I would also like to clarify that funds collected through this ‘wealth solidarity tax’ will be ring-fenced to ensure that it is utilized for distribution and poverty eradication activities only,” said Geingob.
According to the finance ministry the solidarity tax would be introduced as a progressive withholding tax on income at a graduated scale for individuals, and as a flat amount levied from juristic persons, close corporations, partnerships, trusts and companies.
The finance ministry has decided on an income above the average per capita income of US$5 700 (about N$79 000 annual income) as the preliminary threshold for the income tax.
It is estimated that an amount of N$600 million will be raised annually from this source, which would be accrued to a dedicated fund under the finance ministry and the Office of the Prime Minister. The National Planning Commission and the Ministry of Poverty Eradication and Social Welfare will coordinate its activities.
Geingob introduced his six ideas on how the business sector can help government in the fight against poverty. One is that the business sector “generously contribute in money, kind or technical assistance to the establishment of, and ultimately sustain, the [food] bank”.
Corporate citizens are also challenged to do more in the provision of quality and affordable housing for employees.
“I am aware that mining companies have gone a long way in providing housing to their employees. The mining sector is, however, capital intensive and does not employ many people. On the other hand, it is estimated that a good three hundred thousand workers are employed by the private sector. Imagine the difference it will make to the dignity of your workers if they have shelter, with access to proper ablution facilities and access to electricity,” said the president.
The private sector is also asked to rethink its ownership structures by introducing employee share option schemes and by supporting implementation of the broad-based economic empowerment framework that the government will soon launch. “Empowering workers through shareholding will not only create a sense of belonging, but will also act as an incentive for workers to be more productive, as they will now be working for themselves and share in the wealth created by the company through dividend payments,” Geingob said.
Another challenge to the private sector by the president is for bigger established firms to contribute to SME development, by providing preferential access to their supply chains.
Geingob also says the private sector could ease the burden of government by participating in the funding of growth critical infrastructure, through PPP arrangements.
“These could be in sectors such as energy, transport and other infrastructure. Investing in such infrastructure will free up scarce government resources so that government can build more schools, more clinics and hospitals and attend to other basic amenities,” he said.