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Informal Economy Activities Could Boost Tax Revenue – Utoni Nujoma

By: Hileni Inane

Labour minister Utoni Nujoma says the informal economy has activities that have market value .

He said this would add to tax revenue and Gross Domestic Products (GDP) if they were recorded in the national account.

Nujoma said this on Tuesday at the informal ecomony stakeholders workshops in the capital.

“Informality covers a wide range of situations within and across countries, and it arises for a number of reasons. On one hand, individuals and firms may choose to remain outside the formal economy to avoid taxes and social protection contributions or compliance with standards and licensing requirements,” he said.

He said individuals may rely on informal activities as a safety net and they may lack education and skills for formal employment to access public and financial services.

According to the International Labour Organisation, about 2 billion workers of the world’s employed population ages 15 and older, spend at least part of their time in the informal sector.

However, today, the informal sector still accounts for about 35 per cent of GDP in low and middle income countries versus 15 per cent in advanced economies.

Nujoma added that informality critically affects how fast economies can grow, develop, and provide decent economic opportunities for their populations.

He further said tha informal firms do not contribute to the tax base and tend to remain small, with low productivity and limited access to finance.

“As a result, economic growth in countries with large informal sectors remains below potential,” he said.

According to him, informal workers are more likely to be poor than workers in the formal sector because they lack job security, representation voice and income security.

He said Namibia also faces key developmental challenges such as the growing informal economy, lack of decent and secure jobs and lack or insufficient social protection for workers.

Nujoma stated that the informal economy is also difficult to measure because activities within it cannot be directly observed, adding that

This he said makes it difficult for planners and lawmakers to engage in proper planning, decision making and implement policies of service delivery.

In this light, he said informality would best be tackled by steady reforms such as investment in education and policies that address its underlying causes.

“Attacks on the sector motivated by the view that it is generally operating illegally and contravening legislations are not the answer. Addressing informality is thus essential and urgent to support inclusive economic development and reduce poverty countrywide.”

In 2016 the labour ministry in collaboration with Social Security Commission (SSC) conducted a case study on Namibia’s informal economy. The main objectives of the survey was to characterise the informal sector into the activities of enterprises, and to provide a snapshot of the legal environment within, which social protection can be extended to the informal sector.

Julia Heita

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