Tax relief to push up prices – BoN

The recently proposed tax relief will push up inflation, says Bank of Namibia governor Johannes !Gawaxab.

“Any tax relief means there will be more disposable income which will lead to people spending more,” said !Gawaxab during the repo rate announcement in Windhoek on Wednesday.

The more money people have to spend, the more demand there is for goods and services, pushing up inflation.

The tax relief was tabled in parliament last week by the minister of finance Iipumbu Shiimi as an amendment to the existing income tax bill.

According to the bill, all individual taxpayers will be exempted from paying tax on the first N$100 000 of their income, while small business VAT threshold has been increased to N$1 million from N$500 000.

Currently, the country’s inflation is standing at 4,6%, remaining steady for the months of June and July.

By definition, inflation is the increase in the price of goods and services.

“There has been a welcome slowdown in inflation, and we forecast inflation to come up to 4,7% in August,” said !Gawaxab.

Compared to South Africa, with an inflation rate of 5,10%, Namibia’s inflation remains moderate.

According to !Gawaxab, inflation in services remains edging up, although the inflation of goods has come down.

Speaking during the announcement, central bank economist Johan van der Heever said the inflation in services is coming mainly from the housing sector.

“The service inflation has picked up and lots of it is housing related, but it is still thin and below headline inflation,” said Van der Heever.

He said the inflation rate remains under control.

Last year during the same period, inflation was standing at 6,2%.

Additionally, the domestic economy grew further during the first six months of 2024, as a result of increased economic activity in most sectors, said !Gawaxab.

“Gross domestic product growth is estimated to slow to 3,1% in 2024, due to the expected slower growth in the primary industry,” said !Gawaxab.