27 February 2013

Namibia: Taxman Brings Welcome Relief

STATE old-age pensions are set to be increased to N$600 a month and the tax burden on individual taxpayers and non-mining companies will be made lighter, in terms of Government's budget plans for the year ahead.

Tax relief announced by Finance Minister Saara Kuugongelwa-Amadhila in the National Assembly yesterday afternoon will leave Namibians with N$1,2 billion more in their wallets.

With old-age pensions to be increased by N$50 a month during the 2013-14 financial year, starting on April 1, Government expects to spend a total of N$3,9 billion on pensions for senior citizens over the next three years.

Kuugongelwa-Amadhila's announcement about the pension increase - coming a year after the old-age social grant had been increased by N$50, to N$550 - drew applause from her fellow parliamentarians.

Kuugongelwa also said that individual income tax rates and tax brackets would be adjusted to lighten the general tax burden on individual taxpayers, and that the non-mining company tax rate would be reduced from the current rate of 34 percent to 33 percent in 2013-14 and then to 32 percent in 2014-15.

"The rate reduction has an objective of encouraging economic agents to invest and produce," the minister said.

Also, transfer duty and stamp duty rates and brackets would be adjusted with the aim of encouraging Namibians to acquire property - especially houses - in an environment of runaway property prices, she said. There would be no transfer duty on properties worth less than N$600 000.

The proposed adjustment in income tax brackets would lift the tax threshold to N$50 000, so that people earning less than N$50 000 a year would no longer be paying income tax. The income tax threshold is currently at N$40 000.

When the income tax brackets are adjusted, the top tax rate would still be 37 percent, applying to incomes above N$1,5 million a year.

Personal incomes between N$50 000 and N$100 000 a year would be taxed at a rate of 18 per cent, compared to the current tax rate of 27 percent for incomes between N$40 000 and N$80 000 a year.

Incomes between N$100 001 and N$300 000 would be taxed at a rate of 25 percent, while a tax rate of 28 percent would apply to individuals in the N$300 001 to N$500 000 income bracket, a 30 percent rate in the N$500 001 to N$799 999 bracket, and a rate of 32 percent would apply in the N$800 000 to N$1,5 million bracket, Kuugongelwa-Amadhila said.

After the last adjustment of income tax brackets in the 2009-10 budget, individuals earning between N$80 000 and N$200 000 a year were taxed at a rate of 32 percent on their earnings above N$80 000, and people earning above N$200 000 and up to N$750 000 paid tax at a rate of 34 percent on their earnings in that bracket.

"In this budget, we have increased the incentives to create employment, we have chosen to decrease the burden of taxes, and we have given our families and our pensioners more support," the finance minister said.

"While the approach in recent years was to stimulate economic activity by expanding public spending, we have now chosen to reassure people, to boost confidence, and to give the private sector some space to contribute towards economic expansion and job creation," she said.

With the 2013-14 budget, Government aims to protect and foster employment, invest in education, and strengthen Namibia's health and social services - all while not burdening the country with more public debt than it can bear, she indicated.

Government plans to spend N$47,6 million during the 2013-14 financial year - an increase of 19 percent on the expenditure of N$40,1 billion in the 2012-13 budget.

With last year's budget, total Government spending was projected to increase by only two percent from the 2012-13 financial year, to about N$40,96 billion in the 2013-14 financial year.

The budget deficit is expected to increase from N$3 billion in 2012-13, which would amount to 2,8 percent of the country's gross domestic product, to an estimated N$7,4 billion in 2013-14. The deficit should average around N$5,8 billion a year, or 4,6 percent of GDP, over the next three financial years, the minister said.

With last year's budget, a deficit of about N$4,7 billion - or 4,4 per cent of GDP - was projected for the 2012-13 financial year. With realised revenue during 2012-13 estimated at N$37,1 billion, compared to N$35,4 billion originally expected in the budget, a lower budget deficit of about N$3 billion is expected in 2012-13.

Government's income is expected to total N$40,1 billion in 2012-13, Kuugongelwa Amadhila said.

State debt is expected to increase from N$27,5 billion in 2012-13 to N$32,4 billion in 2013-14 (27,8 percent of GDP), and to N$44,5 billion (30,7 percent of GDP) by 2015-16, she said.

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