Friday, September 25, 2020

Botswana’s Tax-to-GDP ratio fails the grade

Botswana’s total tax revenue as a percentage of gross domestic product (GDP) is still below the stipulated ratio by the Organisation for Economic Co-operation and Development (OECD).

With an average of 22.3 Botswana’s tax to GDP ratio remains a cause for concern. Recently the International Monetary Fund (IMF) released figures which revealed that most African countries’ tax to GDP ratio remains unfavourable as the majority have a ratio lower than the OECD average standard of 34%.

As for the African countries with the highest Tax-to-GDP ratios, Algeria topped the list and was the only African country which surpassed the average standard with 35.5%. Seychelles followed with a ratio of 29%, whilst economic powerhouse South Africa had 25%. Namibia has a ratio of 23%.

Amongst other things, the IMF says that almost half of all developing countries have tax-to-GDP ratios of less than 15%. Although Botswana fairs well as compared to other African countries, it is still way below the set ratio of 34%.

Tax consultant, Gole Tekanyo who spoke to this publication indicated that “In order for Botswana to graduate and leave the league of countries which have below average Tax-to-GDP ratios, she has to set up tax reforms that can deal with economic growth in the country. This applies to the rest of the African continent as well,” she says.

She also said Botswana must improve domestic revenue mobilisation ÔÇô something the IMF has already cautioned the country a few months ago ÔÇô to allow the country to accomplish economic and development goals.

“The time has come for Botswana to pay attention to the informal sector as a way to widen the tax base,” she says adding that the country must relook into its tax policy reforms.

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