04 Aug 2022

Parliament has endorsed the Value Added Tax (Amendment) Bill 2022, which reduces VAT from 14 to 12 per cent and makes cooking oil and liquid petroleum gas zero rated goods for six months.

The bill was tabled on a certificate of urgency on Tuesday by Minister of Finance, Ms Peggy Serame. 

Ms Serame said the two-clause bill was aimed at amending the Value Added Tax (VAT) Act.

“Clause 2 of the bill amends the first schedule to the Value Added Tax Act under paragraph 2 (Y) to include cooking oil and liquid petroleum gas in the list of zero rated items for six months effective 3^rd August 2022,” said the minister in her presentation.

She said the changes were intended to offset the crisis brought about by the impact of the high cost of living due to rising inflation. She added that inflation had adversely affected vulnerable households.

Although the bill was supported by Bobonong MP, Mr Taolo Lucas, he however, said the reduction would not ease the economic hardships on poor people. 

He also said the reduction would result in insignificant changes in food prices.

He urged the Ministry of Finance to develop effective economic diversification strategies and to open multiple revenue streams. 

He said a diversified economy would be better placed to withstand global economic shocks, and that the local economy was fragile due to over reliance on diamond exports.

Tonota MP, Mr Pono Moatlhodi said the VAT reduction was necessary under the current circumstances, but noted that it would decrease revenue collection into the consolidated fund.

“The necessity to effect the decrease of Value Added Tax is long overdue. The unbearable as well as the astronomical side effects on the petroleum products as well as on food products are and continue to keep our citizenry at poverty stricken levels,” said the MP.

Selebi Phikwe West MP, Mr Dithapelo Keorapetse supported the bill, although he said it would not result in much changes to livelihoods since it was a short term measure.

He said consumers were reeling from high commodity prices as a result of increased VAT and utility tariffs.

“The minister should tell the nation what they are doing in the long term to address this issue,” said the MP.

He urged government to focus on employment creation as a long term measure to fight poverty and economic hardships. 

He also urged government to introduce price regulation on basic foodstuffs such as milk, sorghum, maize, bread, cooking oil and sugar.

Mr Keorapetse, who is also Leader of Opposition, urged government to increase corporate income tax from 22 to 30 per cent and to introduce a wealth tax. 

He said it would result in increased revenue which would enable government to reduce tax on ordinary people.

Gaborone North MP, Mr Mpho Balopi said the country should produce its own food in order to address rising food costs locally.

Supporting the bill, Ghanzi South MP, Mr Motsamai Motsamai urged government to cushion elderly people from inflation by increasing the old age pension. 

He also said salaries of Ipelegeng workers should be increased to cushion them from inflation.

Mahalapye West MP, Mr David Tshere opposed the bill. 

He said the temporary measures proposed by the finance minister were not informed by any research and would only benefit traders instead of consumers.

Maun West MP, Mr Dumelang Saleshando also said the amendments proposed would have no effect on prices to consumers, adding that it was unlikely that retailers would reduce prices. 

He also said the six months reduction period was not informed by any scientific evidence.

“Projections indicate that next year global inflation would be higher than it was before the Ukraine crisis and the COVID-19 pandemic,” said the MP.

He also said the reduction of VAT would not solve anything to poor people because the exponential rise in food prices this year was not caused by VAT.

In response to comments by MPs, Ms Serame said the amendments were informed by research. She also said the period of six months was intended to cover this financial year. 

She said authorities would ensure that retailers effect the reduction, and that consumers benefit from the temporary reduction. She noted that price control on certain food commodities would require consultations

The bill passed after 44 MPs voted in favour while none opposed it at the third reading stage. Ends