Namibia Plans 20% Boost to Tax Revenue to Narrow Budget Deficit

Namibia’s government plans to boost tax revenue by 20 percent in the coming fiscal year to rein in the budget deficit and ease its debt burden.

Revenue is forecast to increase to 52.5 billion Namibian dollars ($4.8 billion) in the year through March 2015 from 43.9 billion this year, Finance Minister Saara Kuugongelwa-Amadhila told lawmakers today in her budget speech in the capital, Windhoek. The deficit is projected to narrow to 5.4 percent of gross domestic product compared with 6.4 percent this year.

Namibia is the world’s biggest offshore diamond miner and the fourth-largest uranium producer. The economy has come under pressure as global demand for commodities waned and drought curbed agricultural output. About a third of the government’s income in the coming year will come from the Southern African Customs Union, which uses a revenue-sharing formula to distribute receipts between South Africa, Botswana, Namibia, Lesotho and Swaziland.

The government’s revenue position faces a “significant risk” due to the “uncertainty regarding the future of SACU revenues due to ongoing reforms,” Kuugongelwa-Amadhila said.

Expenditure is set to climb 27 percent to 60.3 billion Namibian dollars in the coming fiscal year and average 64.9 billion over the next three years, she said. The increase is mainly due to higher salaries for civil servants and spending on energy and transportation infrastructure projects, she said.

The government is planning to reduce the budget deficit to 3.5 percent of GDP over the next three years. Total debt stock is forecast to increase by 27 percent to 38.5 billion Namibian dollars in the coming fiscal year, the minister said.

Environmental Taxes

Curbing the shortfall will “mitigate against potential impacts of revenue risks,” she said. “Government intends to finance the deficit mainly from borrowing from the domestic market.”

To broaden the revenue base, Namibia plans to implement environmental taxes and levies to help promote value-adding activities to domestic production. The corporate income tax rate for non-mining industries was reduced by 1 percentage point to 32 percent.

The government plans to set aside 5.3 billion Namibian dollars to finance the 800 megawatt Kudu gas-to-power plant and state-owned mining company, Epangelo Mining.

“This budget is creating an economic environment that inspires confidence and courage in investors looking for a promising future in our economy,” Kuugongelwa-Amadhila said.

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