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Botswana Should Seek More Revenue From VAT, Property: IMF

by Lorys Charalambous, Tax-News.com, Cyprus

13 April 2016


In its report following the recent annual Article IV consultation with Botswana, the International Monetary Fund (IMF) recommended that the Government should enhance non-mineral revenue mobilization, particularly in value added tax (VAT) collections and property taxation.

The IMF noted that, in a period of declining economic growth and after three years of fiscal surpluses, Botswana is now experiencing fiscal deficits – of about three percent of gross domestic product (GDP) in 2015/16 and a projected four percent of GDP in 2016/17. The deficits reflect lower mining revenues, reduced revenues from the South African Customs Union (SACU), and higher fiscal spending related to a government stimulus program.

It was added that SACU receipts have been declining as a share of GDP since 2012, owing to a deceleration in South Africa's GDP growth (which lowered import growth), and their reduction is expected to continue in the foreseeable future.

The IMF predicted a gradual economic recovery and a return to fiscal surpluses in the next three years, partly based on a recovery of the mining sector as diamond prices gradually increase.

However, in light of subdued prospects for revenues from SACU and remaining risks about future diamond receipts, the IMF stressed the need to consider domestic revenue reforms that would enhance non-mineral revenue mobilization, notably in the areas of VAT collections and property tax hikes.

While VAT collections averaged five percent of non-mining GDP over the past three years, the IMF has preliminarily estimated that enhanced VAT administration could yield additional revenue of two percent of non-mining GDP. In addition, it stated that there is scope to increase the property tax rate (which is low by international standards), and the valuation and coverage of residential and commercial properties, to yield an estimated 0.6 percent of GDP.

TAGS: tax | business | value added tax (VAT) | property tax | mining | International Monetary Fund (IMF) | Botswana | Africa

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