…Progressing towards a green economy for Namibia
By Hilary Mare
NAMIBIA’S Vision 2030, the overall development framework for the country, includes principles of environment, sustainable development and prosperity. The Government has put a lot of effort into including environmental sustainability in the process of policymaking as it moves towards its Vision 2030.
In essence, the new environmental tax on the import of electric filament lamps, new and used (re-treaded) pneumatic tyres and new and used motor vehicles – the so-called carbon emission tax introduced this week, makes a case for progress being made towards a green economy.
Without doubt, recognising the importance of reducing carbon emissions and foreseeing the benefits that a low carbon economy can bring ambitious greenhouse gas emissions reductions against a business as usual curve. Policies, frameworks and financial instruments need to support these commitments for any hope of achieving such reductions. The purpose of carbon tax, seen too often as a way to increase the tax base, is intended more to send the necessary price signals to change consumer behaviours and stimulate investor appetite to shift towards low carbon options. With a commitment to implement revenue recycling measures the effects on economic growth in the broader economy should be minimal.
“The idea apparently behind environmental taxes worldwide is to discourage people from harming the environment, by taxing the carbon dioxide emitted by vehicles, people are encouraged to acquire vehicles with lower CO2 emissions as the more CO2 a vehicle emits into the atmosphere, the more damage could be done to the earth’s atmosphere,” PwC senior manager Dennis Hyman said.
Indicators of progress on the green economy can be found in the most recent National Development Plan (NDP4). The NDP4 works to build high and sustained economic growth, with a strong focus on equality and job generation. Some important targets of the plan include four percent growth per annum in agriculture; increasing access to potable water from 85.5 percent to 100 percent, while maintaining sufficient reserves for industrialisation, and decreasing the level of people living in poverty from 15.8 percent in 2009/2010 to below 10 percent by 2016. The NDP4 also has many projections for jobs, although green jobs are not at this time integrated or specifically identified. The government investment allocation for the NDP4, including from State-Owned Enterprises (SOEs), was N$19 billion, though allocation and budget specifications are not detailed.
Other relevant strategies include the Environmental Management Act, introduced in 2007, which includes over 50 provisions with the goal to ensure significant effects of activities on the environment are considered in planning/ decision making, opportunity for participation in assessment processes and ensuring findings of assessments are considered prior to decision making. Namibia has introduced environmental fiscal instruments in various sectors. For instance, fees were successfully imposed on the fishing industry in 1991 to manage the sector ecologically and to increase the share of benefits for Namibians. The fees took the form of an increased cost of fishery licenses and an increase in the price paid for fish caught on a by-catch and fee per tonne. The fiscal reform sought to rebuild fish stocks and strengthen the national fisheries industry, while generating new employment.
By 2003, the contribution of the fisheries sector to GDP increased from US$38 million to US$462 million, while revenues from the fiscal instruments amounted to US$17.9 in 2002. The reform was successful at reducing overfishing and recovering fish stocks, while contributing to new employment amounting to 13 500 jobs. Secondly, after the country’s independence from South Africa, the new Water Resources Management Act introduced water tariffs to promote efficient use of water. However, there is scope to revise the current bulk water and end user tariffs, as well as water tariff subsidies. Regarding energy, levies are imposed on petrol, diesel and paraffin to promote renewable energies. Currently there is a royalty fee of five percent of the market value of oil produced and saved; a petroleum income tax of 35 percent of taxable income and an additional tax on petrol profits (after tax net cash flow on operations). Namibia is also exploring a renewable energy feed in tariff program, though it is in draft as of 2013.
As a result of fiscal concerns, Namibia has sought to broaden its revenue base and implemented new environmental taxes and levies to help promote value-adding activities within the country.
The environmental tax for motor vehicles is calculated by using the following formula: CO2 emission exceeding 120g/km, multiplied by the levy rate (N$40). A vehicle with a carbon emission of 447g/km will therefore have an environmental tax of (447 – 120) x 40, which equates to N$13 080. For tyres, the tax is N$10 per tyre, while electrical filament lamps will be subject to a tax of N$3 per lamp.
Export levies to be introduced to promote domestic value-addition in the primary commodity and natural resources sectors. Expected rates are between zero and two percent. The Minister further confirmed that work will continue on the feasibility of a presumptive tax for SMEs which was announced in the 2014/2015 budget.
Conclusively, it is important for all organisations to assess the likelihood and extent of risk exposure to the tax, understand where they may be exposed to tax, to what extent they will be exposed and start planning to transition away from a reliance on carbon. Outside of direct taxation businesses should also anticipate potential price increases on taxable activities such as transport. A full review of a business’ supply chain will also provide information on a supplier’s exposure which may
trigger price hikes.
Confidente. Lifting the Lid. Copyright © 2015