Revenue Productivity Of The Tax System In Namibia

ABSTRACT

Namibia depends mainly on tax revenue to finance the budget. This study evaluate the revenue productivity of Namibia’s overall tax system on the basis of estimates of tax buoyancy and tax elasticity, using the quarterly time series data for the period 2001 to 2014. Secondary data from ministry of finance was used in this study. Time series properties were tested using Dickey fuller (ADF) to test the existence of unit roots among the variables. The variables were found to be non-stationary but became stationary at their first differences. The residual based test to cointegration revealed there is cointegration among the variables. The study employed Ordinal Least Square to regress the equations. The tax buoyancy was computed using Singer’s (1968) Dummy variable technique to abstract from discretionary changes in the tax system. Tax elasticity had been estimated using two methods, historical time-series tax data (HTSTD) adjusted to discretional tax measure (DTMs) and unadjusted HTSTD with dummy variables as proxies for DTMs. In spite of the positive impact that the reforms had on tax buoyancy and elasticity findings revealed that this was not sufficient to generate adequate revenue to eliminate the recurring budget deficit. The estimation results revealed that the tax system as whole is income inelastic and not buoyant.