Thursday, April 1st, marked the beginning of the implementation of a hike in Value Added Tax (VAT), as well as a plethora of other levies and increases in other tariffs such as electricity and fuel.
The increments come on the backdrop household incomes having been affected by the Covid-19 pandemic with thousands of people having lost their jobs since the start of the pandemic.
According to recent data from Statistics Botswana (SB), over 15, 000 lost their jobs between the first quarter of 2020 and the fourth quarter as employment levels dropped by 3.1 percent.
This development led to the unemployment rate going up by 1.3 percent, from 23.2 percent in the first quarter of last year to 24.5 in the fourth quarter of 2020.
While taxes, levies on plastic and imported second-hand vehicles, and electricity went up this week, a recent study by the Bank of Botswana (B0B) also revealed that by end of December 2019, Botswana’s household debt had reached P50.7 billion.
The amount comprises bank loans which account for 88.6 percent, micro-lenders loans at 9.4 percent, hire purchase credit at 1.3 percent, and Savings and Credit Cooperatives Societies (SACCOS) loans which account for 0.6 percent.
The government’s argument to hike VAT, which has been increased from 12 percent to 14 percent is that the rate is the lowest in the region and that the tax also widens the government’s revenue base as the economy is faced with fiscal deficits.
Further, the government has also introduced a tax on sweetened soft drinks such as the likes of Coca-Cola noting that it is an effort to fight lifestyle diseases and obesity at the same time raising revenue for the government.
Meanwhile, a tax expert, Jonathan Hore, explained that for some time, some businesses will need to apply both 12 percent and 14 percent on sales.
“The VAT Act has what is referred to as transitional measures whenever a VAT rate changes and these, by default, result in the application of two VAT rates for a given time,” he explained.
Hore said the VAT Act provides that where goods are sold and delivered before the date of change in the VAT rate, VAT must be charged at 12 percent; although an invoice is raised post the effective date.
“On the other hand, goods sold after the said date will have to be subjected to VAT at 14 percent instead,” he said.