SONA2016: Solidarity Tax and Income Grant explained

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Windhoek

The mooted solidarity tax would be for a specific period of time only and would target the very wealthy whose annual earnings are in the highest income brackets and not those earning N$78,000 per year, as was previously reported.

Further, government has plans to introduce a Conditional Income Grant to unemployed youth, as opposed to the Basic Income Grant that has been piloted in the country in recent years.

The Conditional Income Grant would go to unemployed youth participating in various poverty alleviation schemes, such as the management of food banks and community policing. The Basic Income Grant had proposed giving N$100 per month to every unemployed person in the country.

These are some of the surprise pronouncements by President Hage Geingob when he made his State of the Nation Address in parliament yesterday, after much public speculation about the proposed Solidarity Tax and Basic Income Grant.

Money raised through the Solidarity Tax would be ring-fenced from other taxes and would be used strictly for the purpose of funding poverty alleviation programmes.

“While the payment threshold for Solidarity Wealth Tax will be finalised after consultations, it is important to clarify that the Solidarity Wealth Tax will only be applicable to the wealthy in high income brackets. For the sake of clarity, it will definitely not be N$78,000 per annum,” President Geingob said, adding that: “This tax measure will have a sunset clause and is thus not indefinite.”

A task team that includes independent tax experts has already been established under the leadership of Finance Minister Calle Schlettwein to draft a White Paper on the modalities of the Solidarity Wealth Tax for public consultation.

When the pubic consultation is finalised, a special tax committee comprised of experts from the public and private sector will be established to ensure that tax collected through the Solidarity Wealth Tax is separately audited, ring-fenced from government expenditure and wisely invested in targeted programmes, Geingob said.

“None of us can be proud of the high Gini-coefficient in Namibia, which implies a significant gap between the rich and the poor. Wealth disparities have reduced since Independence, but not at the required pace,” the president said.

The Gini coefficient is a statistical measurement of income distribution among a country’s residents and is the most commonly used measure of inequality.

The president also called on those Namibians “who can be reasonably categorised as wealthy, whether black or white, to recognise and act upon their vested interest in the maintenance of our socio-political stability.”

“We see the disturbing images of inequality in Namibia on a daily basis. It is critical to understand that poverty eradication measures and wealth redistribution strategies are two distinct, but equally critical, imperatives,” he said.

President Geingob also announced, for the first time, that unemployed youth would be tasked to manage food banks and would receive “some sort of compensation” for their work.

The work by the unemployed youth, who would be organised in street committees, would constitute a conditional income grant, with which government intends to replace the proposed Basic Income Grant.

The youth would be tasked with identifying the most vulnerable and those afflicted by hunger and poverty in their communities, will keep their streets clean and will be trained in basic community policing.

“This will ensure clean communities, where the most vulnerable have access to food, while also enhancing safety and security and reducing the violence levels in our communities.

“The alarmingly high levels of gender-based violence, directed primarily at women and children, require a concerted effort from all stakeholders to bring a tangible reduction in GBV statistics,” said President Geingob.

The unemployed youth would also be tasked with the construction of rural toilets, as part of the effort to address rural deprivation, hunger and poverty, youth unemployment and the lack of sanitation, while providing an economic stimulus.

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