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

“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 3rd 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:

Malt beer

8.5%

Unfortified wine

8.0%

Fortified wine

6.7%

Sparkling wine

8.0%

Ciders & alcoholic fruit beverages

8.5%

Spirits

8.2%

Cigarettes

6.7%

Cigarette tobacco

6.8%

Pipe tobacco

7.0%

Cigars

6.7%

 

  • 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                 

Budgetary Provisions for the 2016/2017 Financial Year per Sector

 

Budget allocation
(N$ billion)

Economic and Infrastructural Development

              13.56

Targeted Subsidies - Public Enterprises

              17.23

Social Sector (Total):

            28.53

Education

              16.20

Health and Social Services

                7.23

Public Safety and Order

              13.01

Administrative

                6.03

Contingency Provision

                0.20

Unforeseen Emergencies

                0.28

Projected deficit: 4.3%

 

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

 

2014

2015

2016 - projected

2017 - projected

Global Economic Growth

3.40%

3.10%

3.40%

3.60%

Domestic Economic Growth

6.40%

4.50%