Namibia urged to improve tax revenue collection

Namibia must focus on mobilising more domestic capital to fuel inclusive and sustainable economic growth, says the African Development Bank (AfDB).

According to the bank’s country focus report, Namibia has to focus on tax revenue collection to become a self-reliant economy.

“Mobilising domestic capital is no longer optional – it’s essential. Improving tax revenue collection and boosting domestic savings will enable us to finance our development priorities from within,” the report reads.

It, however, warns that the revenue collected should be used and allocated correctly to ensure it supports national development goals.

“It’s not just about how much we collect; it’s about how wisely we use it,” the report reads.

Namibia’s economy remains heavily reliant on natural resource revenue.

Currently, revenue from the Southern African Customs Union accounts for 30% of total revenue, taxes on individual incomes account for 22%, while value-added tax (VAT) accounts for 21%, and company taxes only account for 13%, with the remaining 14% coming from smaller tax categories.

According to the report, the average non-tax revenue for African governments is equivalent to 4.5% of the gross domestic product (GDP).

Countries such as Botswana and Congo recorded non-tax revenue of up to 16% of GDP between 2000 and 2018.

Meanwhile, non-tax revenue contributed only about 2% of GDP on average in Namibia.

“The poor performance is due to the weak administration and unintegrated systems,” the report reads.

Over 50% of the national budget is currently allocated to the social sector, supporting access to basic public services.

The country’s expansionary counter-cyclical fiscal policy in recent years, particularly during the Covid-19 pandemic, has, however, led to high public debt levels.

Between 2018 and 2022, government expenditure grew to 38% of GDP, outpacing average revenue, which stood at 31.7%.

“However, the deficit has since improved and is estimated at 2.8% in 2024” the report reads.

To address some of these issues, the AfDB has recommended that the country rely more on domestic financing to reduce its exposure to exchange rate risks and help strengthen our capital markets.

“Domestic financing is the preferred option to support domestic capital market development and reduce exchange rate risk,” it reads.

In terms of revenue performance, Namibia is doing better when compared to other small economies.

The country’s tax-to-GDP ratio averaged 19.7% between 2020 and 2024 – higher than the 18% average for emerging markets.

This is mainly due to a high tax rate.

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