Sacu money ‘not a windfall’

THE annual revenue from the Southern African Customs Union (Sacu) was not a windfall or a donation, Finance Minister Saara Kuugongelwa-Amadhila said in her response to the Budget debate in the National Assembly yesterday.

All five Sacu member states pay their income from customs and excise into the joint Sacu revenue pool, which is then allocated to each of them according to a specific formula, she said. “Our share from this pool is thus directly affected by our country’s economic performance,” the Minister said.”If our Gross Domestic Product (GDP) and imports grow slower than those of other Sacu member states, our revenue share will decline, while our share increases if our economy expands faster.”Therefore, Sacu revenue is not a donation from anywhere to any member country but rather a proportion of its contribution to the custom union’s revenue pool each year.”Sacu revenue has contributed about one third of Government revenue in the past few years, but increased in the past year, which caused opposition MPs to argue it was a one-off windfall.The other Sacu members are South Africa, Botswana, Lesotho and Swaziland.Minister Kuugongelwa-Amadhila then dealt with the Free Trade Area (FTA) envisaged by 2008 for the 14 member states of the Southern African Development Community (SADC), which will result in less Sacu revenue in future.”The FTA will lead to more international trade.The liberalisation means less tax revenue from trade for our Government, but the trade tax reduction benefits directly the people of Namibia,” she said.”It means lower prices for consumers and increased turnover for importing companies.The extra money in people’s pockets will be spent or go into profits, which means that Government will recover some of the decreases through other taxes such as tax on income and profits from Value Added Tax (VAT).”The “exceptionally high revenue if this year” would allow Government to spend more on social programmes and infrastructure projects and reduce its debt.”The debt reduction will allow Government to borrow again over the next two financial years in order to smoothen expenditure and maintain presence in the money market and at the same time staying within the debt target,” Kuugongelwa-Amadhila said.On the call for more tax cuts and exemptions for the poor, she said Government remained open to a tax review, but a balance should be maintained with regard to the ability of the budget to absorb associated costs.”Further tax cuts can only be accommodated if revenue increases further, if the ability of the State to deliver public services is not to be compromised.”Tax incentives were currently being reviewed to encourage more investment and broaden the tax base that would provide more flexibility for further tax cuts.Efforts to collect more revenue would continue, Kuugongelwa-Amadhila said.She then told the House that the financial sector had finally submitted a draft Financial Charter to her Ministry to be finalised and implemented by January 2008.Touching on the possibility of increasing State pensions, the Minister said this would be done “when we can”.”Our share from this pool is thus directly affected by our country’s economic performance,” the Minister said.”If our Gross Domestic Product (GDP) and imports grow slower than those of other Sacu member states, our revenue share will decline, while our share increases if our economy expands faster.”Therefore, Sacu revenue is not a donation from anywhere to any member country but rather a proportion of its contribution to the custom union’s revenue pool each year.”Sacu revenue has contributed about one third of Government revenue in the past few years, but increased in the past year, which caused opposition MPs to argue it was a one-off windfall.The other Sacu members are South Africa, Botswana, Lesotho and Swaziland.Minister Kuugongelwa-Amadhila then dealt with the Free Trade Area (FTA) envisaged by 2008 for the 14 member states of the Southern African Development Community (SADC), which will result in less Sacu revenue in future.”The FTA will lead to more international trade.The liberalisation means less tax revenue from trade for our Government, but the trade tax reduction benefits directly the people of Namibia,” she said.”It means lower prices for consumers and increased turnover for importing companies.The extra money in people’s pockets will be spent or go into profits, which means that Government will recover some of the decreases through other taxes such as tax on income and profits from Value Added Tax (VAT).”The “exceptionally high revenue if this year” would allow Government to spend more on social programmes and infrastructure projects and reduce its debt.”The debt reduction will allow Government to borrow again over the next two financial years in order to smoothen expenditure and maintain presence in the money market and at the same time staying within the debt target,” Kuugongelwa-Amadhila said.On the call for more tax cuts and exemptions for the poor, she said Government remained open to a tax review, but a balance should be maintained with regard to the ability of the budget to absorb associated costs.”Further tax cuts can only be accommodated if revenue increases further, if the ability of the State to deliver public services is not to be compromised.”Tax incentives were currently being reviewed to encourage more investment and broaden the tax base that would provide more flexibility for further tax cuts.Efforts to collect more revenue would continue, Kuugongelwa-Amadhila said.She then told the House that the financial sector had finally submitted a draft Financial Charter to her Ministry to be finalised and implemented by January 2008.Touching on the possibility of increasing State pensions, the Minister said this would be done “when we can”.