The International Monetary Fund (IMF) is breathing heavily on the neck of the Botswana government to have it pass into law and implement the new Tax Administration Act.
The IMF team which concluded its visit to Botswana at the end of July 2017 is said to have “reminded” top government officials, amongst them Minister of Finance and Economic Development Kenneth Matambo and the Bank of Botswana Governor Moses Pelaelo of the need to accelerate the planned tax revenue reforms.
Although the government is yet to make details of the new tax law public, in his 2017 budget speech delivered in February 2017, Matambo hinted that Botswana’s relatively narrow revenue base, largely confined to mineral and Customs and Excise, provides a challenge about the extent to which the country can expand the scope of its economic diversification and export-led growth.
As a result, Matambo said that with mineral revenues declining and those from SACU being volatile, there is an urgent need to diversify Botswana’s revenue base towards more sustainable and reliable sources.
“To this end, my Ministry is considering proposals by the Taxation Review Committee of how to diversify the Government revenue base. These proposals include; adjusting various taxes, levies, permits and licences and reviewing some tax expenditures such as VAT exemptions”, Matambo said in February 2017.
The IMF team on the other also says that domestic revenue mobilization will provide Botswana with added funding for development spending and help protect buffers.
In addition, IMF says it would be important for Botswana to consider streamlining VAT exemptions, simplifying the personal income tax, and accelerating plans to register and re-evaluate properties.
The Fund has in the past indicated that Botswana’s tax revenue reforms need to be accelerated to protect public finances against any adverse developments and maintain the country’s track record of sound fiscal management.
Following a small contraction in 2015, domestic economic activity recovered in 2016 with real GDP growth of 4.3 percent. Mineral production has however remained subdued, but diamond sales rebounded as conditions in the global market begun to improve. Non-mining activities also expanded, supported by what IMF calls “accommodative fiscal and monetary policies” and reforms in the electricity sector.
