Govt must curb spending or find new revenue sources

GOVERNMENT’s well-intentioned aim of curbing spending by 2010 cannot be sustained unless new sources of revenue collection are found, an economic expert has warned.

Speaking at the annual budget workshop for Members of Parliament yesterday, including Cabinet ministers and heads of parastatals, Robin Sherbourne said Government needed to map out long-term tax-collecting strategies instead of what he called the “hope and pray economics” method followed at present. “Unless Government spending drops or we suddenly find more revenue elsewhere, we fall back into the routine of an annual five per cent budget deficit,” Sherbourne warned.He had very few listeners.Most of the time only eight MPs, including two Ministers, were present, swelling to 14 for a short while, after the meeting started 30 minutes later than scheduled.There are 78 Members in the National Assembly.Sherbourne noted that the unexpected windfall from the Southern African Customs Union (Sacu) would be short-lived and would dry up once the regional Free Trade Area (FTA) was implemented in January next year.”You can only suck out taxes to a certain ceiling from taxpayers and companies, and the ceiling has been reached by now, so new sources for revenue must be found or Government spending must come down,” he added.Sherbourne proposed that Value Added Tax (VAT) should be reduced from 15 to 10 per cent in order to stimulate consumer spending.He further proposed lowering company tax from 35 to 25 per cent.This, Sherbourne said, would encourage more investments in the economy and thus balance the tax cuts.Although the economy was growing by some four per cent each year, the growth had not created more jobs, he noted.”The public sector is very large but Namibia has not really been growing a vibrant private sector.Young professionals work for parastatals rather than starting their own business, making money and employing people.”Calle Schlettwein, the Permanent Secretary in the Finance Ministry, said that the economic productivity of Namibia had dropped in recent years compared to other countries in southern Africa.”This goes for the public sector as well as the private sector,” Schlettwein said.Another economist, Rehabeam Shilimela, criticised the fact that Air Namibia was still being bailed out by Government.”Government also needs to revise and update existing industrial policies, strengthen the Communications Commission and the Anti-Corruption Commission,” he recommended.”Unless Government spending drops or we suddenly find more revenue elsewhere, we fall back into the routine of an annual five per cent budget deficit,” Sherbourne warned.He had very few listeners.Most of the time only eight MPs, including two Ministers, were present, swelling to 14 for a short while, after the meeting started 30 minutes later than scheduled.There are 78 Members in the National Assembly.Sherbourne noted that the unexpected windfall from the Southern African Customs Union (Sacu) would be short-lived and would dry up once the regional Free Trade Area (FTA) was implemented in January next year.”You can only suck out taxes to a certain ceiling from taxpayers and companies, and the ceiling has been reached by now, so new sources for revenue must be found or Government spending must come down,” he added.Sherbourne proposed that Value Added Tax (VAT) should be reduced from 15 to 10 per cent in order to stimulate consumer spending.He further proposed lowering company tax from 35 to 25 per cent.This, Sherbourne said, would encourage more investments in the economy and thus balance the tax cuts.Although the economy was growing by some four per cent each year, the growth had not created more jobs, he noted.”The public sector is very large but Namibia has not really been growing a vibrant private sector.Young professionals work for parastatals rather than starting their own business, making money and employing people.”Calle Schlettwein, the Permanent Secretary in the Finance Ministry, said that the economic productivity of Namibia had dropped in recent years compared to other countries in southern Africa.”This goes for the public sector as well as the private sector,” Schlettwein said.Another economist, Rehabeam Shilimela, criticised the fact that Air Namibia was still being bailed out by Government.”Government also needs to revise and update existing industrial policies, strengthen the Communications Commission and the Anti-Corruption Commission,” he recommended.