Namibian 2009 Budget To Provide Limited Stimulus

by Lorys Charalambous, Tax-News.com, Cyprus

07 April 2009

Namibian Finance Minister Saara Kuugongelwa-Amadhila has unveiled her 2009 budget. The package of measures, which include a reduction in income taxes for the country’s lowest earners and a corporate income tax cut of 1%, has been criticized for failing to give any substantial boost to the economy.

Kuugongelwa-Amadhila has announced that the government will provide a substantial tax cut for the country’s lowest income tax band, offset, in part, by an increase to the highest income tax band from 35% to 37% on salaries above NAD1.26m (USD140,000). The move, although welcomed on the whole, has been quizzed by leading economists who believe the measure will have an adverse effect on the economy by reducing consumer consumption.

The budget has also come under scrutiny for providing little support for the country’s unemployed. Unemployment has now risen to the 40% mark.

The corporation tax rate will be cut from 35% to 34%. The package is expected to provide a boost of NAD260m-300m (USD28.8m-33.3m) to the private sector. Foreign mining companies remain exempt from any taxation.

Namibian think-tank the Institute of Public Policy Research (IPPR) has argued that although the tax reforms will provide relief to businesses and households, they are unlikely to boost the economy. The IPPR predicts that households will err towards saving rather than spending in the face of growing unemployment.

The budget foresees an estimated USD400m deficit (4.5% of GDP) which is expected to bring government debt to USD2.32bn in 2010/11.

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