Connect with us

Hi, what are you looking for?

Business

Tax increase to erode purchasing power

INSET: Basele

A plethora of taxes and levies introduced at the beginning of this month is expected to erode consumers’ purchasing power, experts have warned.

Speaking to Voice Money, Quantitative Analyst at First National Bank Botswana (FNBB), Gomolemo Basele, said the tax pronouncements for 2021 will undoubtedly erode the purchasing power of local households in the short- to medium-term – especially against a backdrop of low real wage growth and unemployment challenges due to the negative impact of the pandemic on domestic economic activity.

According to recent data from Statistics Botswana (SB), over 15 000 people lost their jobs between the first and fourth quarter of 2020 as employment dropped by 3.1 percent, leading to unemployment rate going up by 1.3 percent, from 23.2 to 24.5 percent during the period.

“As a result, spending on necessities such as food; clothing; housing; and transport will continue to constitute the bulk of household consumption into the medium-term, especially within the lower income bracket,” said Basele.

Basele said they expect that the inflationary impact of these developments – with the increase in Value Added Tax (VAT) expected to exert upside pressure across a host of items within Consumer Price Index (CPI) basket – will see the headline figure averaging between 3.4 percent and 3.6 percent this year (compared to 1.9% in 2020).

He stressed that the increase in taxes (VAT, sugar tax, fuel levy increases along with higher electricity tariffs and the possibility of higher rental rates) will exert pressure on household disposable income levels.

Advertisement. Scroll to continue reading.

The increase in these taxes comes as government attempts to boost its coffers which have seen revenue dwindle in the past years, with the situation having been exacerbated by the outbreak of Covid-19 which negatively affected minerals revenue, Botswana’s key revenue earner.

“The government coffers were not sheltered from the disruption caused by the Covid-19 pandemic, as reflected by severely reduced mineral revenue in the 2020/21 fiscal year, along with the expectation of reduced SACU receipts over the next two years,” explained Basele.

On the other hand, Basele said the pandemic necessitated increased operational expenditure over the 2020/21 fiscal year, with government expenditure expected to continue outstripping revenues over the medium-term.

“Beyond borrowing both domestically and externally, the need for additional revenue necessitated the increases in taxes for certain items – supported by the fact that Botswana has maintained some of the lowest tax rates within the region, especially in the line of VAT,” he said.

kabelo@thevoicebw.com
@Kabelo_Adamson

Advertisement. Scroll to continue reading.
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Advertisement
Advertisement
Advertisement

You May Also Like

News

#Prophet’s late night dreams betray fiancé’s cheating ways #Charms, supernatural oil and plenty of sex make for godly mess A suspected conman who posed...

Business

This week Meet the Boss meets FirstCred Managing Director, Dudu Garekwe who has been at the helm of the micro-financing company since April 2018....

News

BITC look within for investment opportunities In response to the economic troubles caused by the pandemic globally and in the face of dwindling foreign...

News

Teen’s lover arrested for double attempted murder A young man who allegedly stabbed his teenage girlfriend over and over again before turning the knife...

News

Court dismiss herdboy’s self-defence claims A herdboy’s justification that he acted in self-defence when he killed another man has failed to convince Francistown High...

News

* ‘Eradication Programme has helped reduce poverty!’ insists Mthimkhulu * ‘P1.4 billion spent on PEP but poverty is on the rise!’ maintains Saleshando Although...

Entertainment

A blow by blow account of a battle to beat the bulge Sporting a neatly trimmed beard and a trendy haircut, he walks with...

Entertainment

LIFE-SAVING LESSONS FROM A DIETICIAN With the Covid-19 death toll rising at a frightening rate, the importance of health is at an all time...

News

SERIAL OFFENDER GETS 35-YEAR JAIL SENTENCE A convicted serial rapist was this week sentenced to a total of 35 years in jail to keep...

News

ATTEMPT TO APPEASE THE DEAD LANDS OLD MAN IN TROUBLE A tribesman who erected a kgotla structure to appease his ancestors has ended up...

International

In the past, Zimbabwean healthcare workers could go on strike for months, even leaving patients to die as they protest their grievances. However, those...

News

MAUN PRIVATE HOSPITAL TO EASE DISEASE BURDEN IN NGAMILAND The newly opened Maun Private Hospital is expected to ease the disease burden in the...

Entertainment

United House Party regular Goitsemodimo Tsitsi Popelelo has her eyes set on the Miss Independence 2021/22 crown. The 26-year-old beauty is also a Sunday...

Entertainment

Singer puts his trust in God With Covid-19 claiming local lives faster than ever before and the all-important vaccine in short supply, Gospel artist,...

News

A group of women in Maun who use mostly recycled materials to make handcrafts have a big dream of some day opening a one-stop...

Business

Cooper Mine strive to empower women Located in Toteng village, some 65km out of Maun, Khoemacau Copper Mine is grooming women engineers in an...

Advertisement

Copyright © TheVoiceBW. (Since1993) made with ❤️ in Botswana.