Mubita’s Anecdote: Taxation in solidarity with the poor

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Not too long ago, this column suggested that it is time that the government looked into the possibility of introducing a Sovereign Wealth Fund.

Such a Fund would ensure sound and transparent economic competitiveness, aligned to the global standards of transparency and accountability in the management of natural resources; prudence in resources management which will curtail a culture of unrestricted spending of unanticipated income, while ensuring that investments will be based on sound, clear and beneficial economic or financial parameters; the availability of a pool of savings or back-up funds for future generations; and the availability of an infrastructure fund to provide intervention in critical areas of the Namibian economy.

Above all, a Sovereign Wealth Fund would be in tune with the mantra of eradicating poverty, essentially because it will enable Namibians, irrespective of their social status, to share and directly benefit from the abundant natural resources of the country.

Furthermore, the column cited a multitude of vibrant economies that have relied on the Sovereign Wealth Fund system to grow their economy and bring prosperity to their people. These include Norway, United Arab Emirates, China, Saudi Arabia, USA and others, where poverty has been drastically minimised. However, suggestions, like the one made by this column are mere suggestions, which may either be fairly considered or disregarded.

There is no doubt that the president is serious in his undertaking to eradicate, if not minimise poverty in the country. He has demonstrated this from day one when he took office by increasing the pension of elderly citizens and by consequently setting an example – the first of its kind – to pledge a percentage of his salary to the fight against poverty.

Within the space of eight months since his inauguration, there have been positive policy formulations and deliberate government interventions, such as intentions to scrap study loans and introduce grants to enable school-leavers to build wealth after college, the establishment of a food bank that would provide for families struggling to put food on their tables, and most recently the solidarity tax.

Government intentions to radically fight poverty are commendable. What is lacking, however, is a thorough explanation, a robust framework and modus operandi necessary to take the nation into confidence as to what these interventions entail. Lack of clear articulation of these intended interventions could leave the nation guessing.
For example, this columnist understands solidarity tax as a government-imposed tax levied in an attempt to provide funding on a temporary basis, towards theoretically unifying or solidifying projects.

In countries where solidarity tax was imposed it helped to act as a supplementary tax to cover temporary financial requirements, rebuild infrastructure and pay for unemployment and welfare benefits.

It is inconceivable that a solidarity tax could become a permanent tax, as this may be unconstitutional. In Germany it was introduced in 1991 to cover the costs of reunification, rebuilding the eastern part of Germany, and later to fund the Gulf War (Operation Desert Storm).

Its continuation has been challenged in the constitutional court, which ruled that it was unconstitutional to continue with it after its purpose had elapsed. Many other countries, including Austria, Denmark, The Netherlands, Sweden, Finland, Spain and Spain have abolished solidarity taxes.

In France, the solidarity tax is a tax on wealth on those having assets that exceed €1.3 million. In fact France is the only EU country to impose a wealth tax. A wealth tax is almost similar to a Sovereign Wealth Fund in that it is a redistributive mechanism used to narrow the gap between the rich and the poor.
One would think the fight against poverty would accommodate this form of tax, rather than a temporary solidarity tax.

Norway and Lichtenstein have their own versions of a wealth tax, while Switzerland levies at cantonal level at variable, but mostly low levels. Finland intends to re-introduce the solidarity tax in order to cope with the current influx of refugees. Finland’s richest will be expected to pay a solidarity tax under the new government proposal.

It is not suggested here that Namibia should copy and paste from other countries. We have a unique situation with a clearly unique inequality problem, where the gap between the rich and the poor is proportionally phenomenal.
It would help government if its intended policy interventions are adequately explained, ideally in layman’s language so that there is no room for misunderstanding or misrepresentation. As things stand right now, an announcement in parliament or cabinet is not enough. It is open to misinterpretation.

Government communications experts should step to the fore and adequately inform the nation about these interventions. It is always important to have a buy-in from the electorate, especially at elections time like now. A well-informed nation is helpful in ensuring that government programmes and policies are supported.

Right now many people believe that solidarity tax will be paid by all and sundry, by everyone who earns a taxable income. The same applies to the notion of a food bank. How many of our people understand what this means and how it will work? How much information, if any, has been made available to the man on the street on this subject?

* Dr. Charles Mubita holds a PhD in International Relations from the University of Southern California.

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