The State plans to collect an estimated P500 million from Batswana by hiking fees, levies and tariff charges on April 1st which will leave the poor, debt-trapped and cashless working class fighting for their own survival in this dwindling economy, KEABETSWE NEWEL reports.
Whenever there is an increase on levies the cost of consumable goods will go up and most food prices will hit Batswana very hard in the pocket, Moatlhodi Sebabole, a Research Manager at First National Bank Botswana (FNBB), previously told this publication.
Yesterday, the Finance Minister Dr. Thapelo Matsheka revealed to the nation that levies, fees and charges will be hiked effective 1st of April. Of interest, public corporations like the Water Utilities Corporation (WUC), Botswana Power Corporation (BPC) and medical aid schemes have in the past systematically eroded the increased disposable income by hiking tariff fees annually. Government will also do the same by taxing all licences, introducing new fees as well as the introduction of property rates at rural areas, where poverty ownership is at its highest.
“When your income is not growing and your expenditure is growing, you then live from hand to mouth,” Sebabole said.
A Finance Lecturer at the University of Botswana (UB) argues that with the government now more concerned at the macro level she will cause the population, at the micro level to suffer as a result of these increases in tariffs.
“Government will not be diversifying but it will just be increasing revenues from those old sources at the expense of ordinary citizens,” he said.
Taxes, Levies, permits and license fees and VAT have always been sources of revenues for the government but contributing at a lower scale to its coffers.
He said government has been wary of the fact that any upward increase in those impositions will affect the social life of its own people, but now with its traditional sources of revenue seeing a decline, government has become less circumspect and more driven by necessity.
If government digs deeper into the pockets of taxpayers then their share of take home income will dwindle. Botswana is amongst the lowest paying in Southern Africa, with average earnings of around P5300, according to Statistics Botswana, 12 percent of which gets eroded by Pay as You Earn (PAYE), the income tax.
Dr. Matsheka revealed that with total revenues and grants estimated at P62.39 billion, and total expenditure and net lending forecast at P67.62 billion, a budget deficit of P5.22 billion or 2.4 percent of GDP is projected for the 2020/2021 Financial Year.
Mineral revenue is estimated at P20.02 billion. Customs and Excise revenue is expected to be P15.38 billion, with Non-Mineral Income Tax estimated at P14.22 billion, while VAT is expected to amount to P8.55 billion.
“The country fiscal’s path is unsustainable,” said the Minister. He was worried that government revenue is not enough to finance state business. As a result his Ministry will, without fail, hike any levy, charge, or fee that exists in Botswana effective April 1st, in a quest to raise an extra P500 million from these taxes. The P500 million, will be an addition to what Batswana were being taxed all along.
This is meant to ensure that Dr. Matsheka restores Botswana’s fiscal sustainability in the medium term. He said on the revenue side, there are various fees, charges and levies, which have not been adjusted for some time. Some of these fees, charges and levies were last adjusted a decade ago according to the Minister.
“As part of the efforts to address the budget deficit, all fees, charges and levies will be adjusted with effect from 1st April 2020, thereafter on an annual basis. Measures will also be put in place to implement the cost recover policy, including collection of tertiary students’ loan repayments,” he said.
Dr. Matsheka is not saying anything new. In-fact he is following his predecessor, Kenneth Matambo’s footsteps. During his budget speech last year, the then Minister Matambo said government will start collecting property rates in rural areas, a previously unheard of practice. Matambo said the initiative is aimed at ‘utilizing resources within those rural areas’ to spearhead developments. The money will be collected by local authorities. This means that any poor Motswana in rural settlements who owns a house or plot will be taxed, just for owning that property, failing which penalties will be imposed.
It was Matambo last year who announced that government will adjust various taxes, levies, permits and licenses as well as review some tax expenditures such as the VAT exemptions. Some of these have already been implemented while some will be implemented under Dr. Matsheka.
Moreover, what Dr. Matsheka will implement this year will be an addition on a job already started by Matambo who said last year that the Finance Ministry will, “adjust various taxes, levies and review some tax expenditures such as VAT exemptions.”
There were food items, mostly staples which were zero-rated under the VAT. Under the new tax reforms those items are likely to be taxed, taking more money from the households. As at December 2018, there were 277,762 household borrowers in Botswana, with a total of P33.1billion of loans extended by commercial banks, according to TransUnion Botswana.
Dr. Matsheka emphasised the need for fiscal consolidation in a quest to improve the country’s fiscal position and financial prudence.
As a first step towards prudent fiscal management of the economy, Government has reduced budget deficit to 2.4 percent, however, more taxes and levies will have taken from Batswana to further achieve the fiscal position which Dr. Matsheka.
“This calls for rigorous fiscal consolidation measures, which Government will institute in 2020/2021 Financial Year. These measures include sustained efforts to intensify revenue optimization, enhancing collection efficiencies, cost containment, developing effective strategies to minimize and ultimately eliminate waste, as well as concerted efforts to re-build a culture of high performance in the economy,” he said.
Dr. Matsheka said his Ministry is working with Ministries on the review of user fees and service charges across Government. So far, the Ministries of Agricultural Development and Food Security; Environment, Natural Resources Conservation and Tourism; Land Management, Water and Sanitation Services; Transport and Communications; as well as Defence, Justice and Security; are undertaking fee charges review. It is expected that additional annual revenue in excess of P500 million will be collected upon implementation of the revised fees and charges.
He further said BURS will also redeploy resources in key operational areas to enhance revenue collection. Specifically, intensifying debt reduction efforts and increasing inspections on imported goods to curb instances of non-compliance by importers at ports of entry.