Government expects 20% increase in Personal Income Tax revenue

Government has increased its Personal Income Tax revenue forecast to over 20% in the 2018/19 trading year, with the objective to collect an estimated N$13 billion, Institute for Public Policy Research’s Cheryl Emvula observes.

Treasury has revised collections for personal income tax up N$2 billion to N$13 billion since the November mid-term budget of 2017, Emvula said. 

“This increase has been justified by a more efficient tax collection process and foremost economic recovery over coming years. These collections are expected to contribute N$2.2 billion more than was received in the prior financial year,” said Emvula.

He however regards this as ambitious “Given the current state of the local economy.”

“With rising unemployment and below inflation wage adjustments planned for the civil service and many others, the only plausible explanation for the over 20% increase in personal income tax in 2018/19 when compared to 2017/18, is an adjustment in the base, implying that the 2017/18 figures may be understated," he said. 

Meanwhile, tax exerted on ordinary Namibians has been on a downward trajectory compared to prior estimates over the past few years.

Said Emvula, “The initial downward revisions correlated with increases in unemployment experienced in the economy between 2014 and 2016, with the unemployment rate spiking to 34% in 2016, up from 27.9% in 2014.”

In the same vein, Indirect tax on the domestic consumption of goods and services, otherwise known as Value Added Tax or simply VAT has been estimated to generate less revenue than was predict ted in the last budgets.

This, Emvula said, correlates with lower expenditure in the economy by both government and consumers.

“Nonetheless, VAT contribution to revenue still amounts of 22% of the total revenue capture and will remain around this figure for the foreseeable future. VAT for the 2017/18 period had been accurately estimated at N$13.7 billion,” he added.

However, Emvula noted that VAT’s forecasted values are now expected to be lower than previously anticipated.

“VAT collection for 2018/19 is estimated to generate just under N$13 billion, nearly N$800 million less than the previous period. This is the first anticipated decrease in VAT collections since 2013/14,” he said. 

He also added, “The VAT collection forecasts for the 2018/19 year have been revised down by more than N$2.1 billion when compared to the annual budge forecasts of 2017. Going forward, VAT collection forecasts suggest that from the lower base in 2018/19, VAT will grow over the remainder of the forecast period, to N$14.6 billion by 2020/21.”