02 Feb 2021

Value Added Tax (VAT) will be increased from 12 per cent to 14 per cent with effect from April 01.

Delivering the budget speech on Monday, Minister of Finance and Economic Development, Dr Thapelo Matsheka said Botswana currently had one of the lowest VAT rates in the world, adding that even with the increase, the VAT rate would remain amongst the lowest in the SADC region.

He said increasing the VAT would broaden the domestic revenue base.

Dr Matsheka indicated that domestic revenue generation was low and needed to be increased to support the goal of fiscal sustainability.

He said that then required both increased efficiency through improved tax administration as well as new taxes or increased tax rates.

Among them, Dr Matsheka indicated that it was also necessary to increase the rate of the fuel levy.

He said the fuel levy would be increased by P1 per litre on April 01.

He stated that tax was introduced at the same time as VAT, and compensated for the fact that fuel was zero-rated for VAT purposes.

He noted that in principle, the fuel levy should approximate the VAT rate, however, indicated that the rate had not been adjusted to reflect the rising cost of fuel or rising VAT rates.

Dr Matsheka further said in order to raise more revenue for the government and to equalise rate with that on interest income, the withholding tax rate on dividends would be increased to 10 per cent.

Furthermore, Dr Matsheka said in order to alleviate the burden on taxpayers and reflect the impact of inflation over time, the threshold at which income earners become liable for income tax would be raised to P48 000 per annum with effect from the 2021/2022 tax year.

He said the threshold had been unchanged at P36 000 per annum since 2011, and the change would reduce the income tax obligations of all taxpayers.

Dr Matsheka further said the government had taken a decision to offer a tax amnesty during the coming tax year in an effort to further ease the burden on taxpayers

He explained that taxpayers with outstanding tax amounts would be granted an opportunity to clear the principal amount owed in exchange for write off of interests and penalties charged during the previous tax periods without fear of prosecution.

He encouraged companies and individuals to take advantage of that dispensation to clear their arrears to be in good standing.

He said by clearing their tax arrears, companies would be in a position to participate in public procurement, which requires tax clearance from the Botswana Unified Revenue Service.

Dr Matsheka also stated that government would introduce a levy on sweetened beverages related to their sugar content, at a rate of 2 thebe per gram of sugar above a content of 4 gram of sugar per 100 millilitres.

He said that was due to address a health challenge and at the same time raise revenues.

He indicated that Botswana had a health problem with many people consuming too much sugar, leading to problems of obesity and diseases such as diabetes.

He, therefore, said the price rise for drinks would also provide an incentive for consumers to switch drinks with lower sugar content, and for manufacturers to do the same.

Regarding the introduced levy on plastic bags to reduce pollution, Dr Matsheka said it was never implemented.

He said during the coming Financial Year, the necessary statutory instrument would be introduced to ensure that the plastic bag levy becomes operational.

 

Dr Matsheka further said with the dual objectives of raising revenue and addressing environmental concerns regarding pollution, the government was also working on the modalities of imposing a levy on second-hand vehicles imported into Botswana. BOPA