- As diamond revenues weaken, the African Development Bank says Botswana must diversify domestic revenue through better tax administration, digital systems and broader tax bases
TLOTLO KEBINAKGABO
Botswana needs sound tax policy design backed by strong institutional enablers to mobilize domestic revenue effectively, according to the African Development Bank Group’s Country Focus Report 2026: Botswana, Mobilizing Botswana’s Development Financing at Scale in a Fragmented World.
The report says key foundations include sustained political commitment, strengthening the capacity of the Botswana Unified Revenue Service (BURS) to increase collections, and robust legal frameworks for enforcement and transparency measures that build taxpayer trust.
It says interoperable digital systems, including unique taxpayer identification, integrated databases and secure e-payment platforms, can reduce leakages and broaden the tax base. E-filing, e-payments and emerging e-invoicing are increasingly important to modernizing revenue collection.
“VAT revenue can also increase through real-time reporting, better and coordinated systems, and audit targeting without necessarily raising tax rates,” the report says.
Revenue falls
The report says Botswana has historically benefited from strong mineral revenues, prudent macroeconomic management and sovereign savings that supported fiscal stability and infrastructure development.
However, declining diamond revenues, rising expenditure pressures and constrained fiscal space have increased the need for more diversified and sustainable financing sources.
In nominal terms, total domestic fiscal revenue declined from US$6.2 billion in 2021 to US$5.0 billion, alongside a decline in economic growth and the global price for natural diamond. The revenue-to-GDP ratio also declined from 31.4% to 24.9%.
The report says strengthening domestic resource mobilization through improved tax administration, digitalization and broader tax bases will be critical. It also identifies improved public financial management, expenditure efficiency and strategic borrowing as measures that can improve the government’s ability to finance development priorities while maintaining fiscal sustainability and resilience to external shocks.
Tax gaps
Botswana’s tax structure is mainly based on personal income tax (PIT) and value-added tax (VAT), with VAT contributing roughly 35% of collections, supported by excise and customs duties.
PIT contributes modestly, with the 25% PIT rate below the African average of 31.3%, the report says. A narrow formal employment base, high informality and tax exemptions limit revenue potential.
While revenue administration is described as relatively advanced, gaps remain in audit capacity, data integration and compliance enforcement.
The report recommends sequencing reforms. Early gains could come from integrating taxpayer systems, strengthening compliance, tightening exemption management and expanding digital tools for VAT and customs administration.
A second phase would broaden the tax base, rationalize incentives, strengthen property taxation and enhance enforcement in mining and high-income non-mining sectors.
Long-term sustainability, it says, will depend on stronger governance, improved public service delivery and a stronger fiscal social contract to boost voluntary compliance.