Namibia in Numbers

How much do taxes reduce inequality?
Namibia Gini coefficient: 0.73 pre-tax, 0.64 post-tax

The Gini coefficient measures inequality on a scale from zero to one, with higher values indicating greater inequality.

According to the World Institute for Development Economics Research (UNU-Wider), Namibia’s 2023 Gini coefficient is 0.73 before tax and 0.64 after tax. Namibia ranks second in pre-tax inequality, but falls to 12th place once taxes are taken into account.

UNU-Wider data suggests that global inequality has marginally improved over the past four decades, although it has worsened in Europe and the United States.

Inequality measured before and after tax can differ substantially, with a larger gap indicating a greater degree of redistribution achieved through a country’s tax and benefits system.

As one might expect, income inequality decreases in most countries after taxes are applied. Denmark, the United Kingdom, and France rank highest in terms of reducing income inequality through taxation.

Namibia and South Africa show the largest absolute reductions, though both still maintain very high levels of inequality after taxes.

Some countries, particularly in central and West Africa, experience an increase in inequality after taxes, suggesting that redistribution and tax is effectively regressive.

It is important to note that pre-tax income distribution already reflects individual behaviour influenced by tax policy. For example, a person may be reluctant to work additional hours if they know the extra income will be taxed at a higher marginal rate than that on what has already been earned.

After-tax inequality figures can also understate actual inequality, as they typically exclude indirect taxes such as value-added tax (VAT).
Since VAT is a consumption tax and lower-income households spend a larger share of their income on consumption, it is argued that VAT increases effective inequality.

• Tannan Groenewald is the head of data and analytics at Cirrus Capital.

In an age of information overload, Sunrise is The Namibian’s morning briefing, delivered at 6h00 from Monday to Friday. It offers a curated rundown of the most important stories from the past 24 hours – occasionally with a light, witty touch. It’s an essential way to stay informed. Subscribe and join our newsletter community.