Botswana to raise VAT to boost revenue

Botswana will increase its value-added tax for the first time in 10 years to boost revenue after the Covid-19 pandemic hurt its key mining and tourism sectors, Finance Minister Thapelo Matsheka said on Monday.

Presenting the April 2021 to March 2022 budget to parliament, Matsheka said VAT would increase to 14% from 12% in April, while a tax on sugar-sweetened beverages would also be introduced. VAT was last increased in 2010.

"We are introducing measure to restore fiscal sustainability after many years of recurring deficits. Botswana has one of the lowest VAT rates in the world and even at 14% it is still low by regional standards," Matsheka said.

Outlook

The economy is projected to have contracted by 7.7% in 2020.

"We however expect a robust recovery in 2021 to a growth of economy as well as successful implementation of the policies we have put in place," Matsheka said.

Botswana's budget deficit for 2020 is estimated to have widened to 11.6% of gross domestic product from an earlier forecast of 7.98% of GDP.

The deficit is seen narrowing to 2.87% of GDP this year as diamond sales are expected to recover, while expenditure will also be contained.

Matsheka said minerals revenue in the diamond producing nation fell by 67% to 6.56 billion pula (US$596.96 million) in 2020. The mining sector provides a fifth of the country's GDP and 80% of foreign exchange earnings. - Nampa/Reuters