Seeking to dismantle a black economy dragging on economic growth, the Botswana Unified Revenue Services (BURS) wants to lure informal workers into the social security net – and the reach of the tax man, Commissioner-General, Jeanette Makgolo said.
The informal sector plays a significant role in economic activity, she said during the 9th Annual African Tax Research Network (ATRN) Congress in Gaborone.
The congress, held over three days and themed “Contemporary Taxation Issues in Africa,” convened tax professionals, academics, policymakers, and civil society organisations from across the continent to explore emerging tax issues.
Makgolo said there is a need for innovative strategies to improve revenue collection from informal sectors in Africa, including Botswana. This, she argued, is essential for strengthening national economies and ensuring fair taxation.
Despite Botswana’s commitment to enhancing domestic resource mobilisation through improved tax and revenue collection systems, the country faces challenges in taxing informal businesses. With a population of fewer than three million, Botswana has made notable progress in tax administration, reflected in a substantial increase in tax collections over recent years.
“In the financial year 2023/24, Botswana saw a 19.5 percent increase in revenue collection from the previous year, totaling P59.4 billion,” Makgolo noted. This growth underscores Botswana’s dedication to building a robust and transparent tax system that supports economic development.
Makgolo acknowledged that this success comes with challenges, particularly in integrating the informal sector into the formal tax system. The informal economy, often seen as a hidden source of untapped tax revenue, presents both opportunities and challenges. While it could potentially bolster national revenues, the sector’s minimal contributions and the administrative burdens associated with taxing it pose significant difficulties.
In Botswana, where the informal sector accounts for an estimated 30 percent of the labor force, its contribution to tax revenues remains disproportionately low. Makgolo explained that BURS’s approach sometimes intentionally keeps the sector’s tax contributions low to encourage its growth and formalisation.
“Despite its size, the informal sector’s contribution to tax revenues is intentionally kept low at times to incentivise its scaling up and growth,” she said.
Makgolo stressed the importance of incorporating the informal economy into the tax system to ensure that all economic activities contribute to national revenues and support Botswana’s economic development.
In his keynote address, Minister of Communications, Knowledge, and Technology Thulagano Segokgo highlighted the broader African context of this challenge. The informal sector contributes an estimated 55 percent of Africa’s Gross Domestic Product (GDP) and employs over 70 percent of the workforce in some countries. Yet, its tax revenue contributions remain low, exacerbating revenue gaps and perpetuating inequalities.
“While Botswana’s informal sector is smaller compared to many African countries, it remains vital, especially in rural areas and among micro and small enterprises,” Segokgo noted.
He emphasised that the government, through BURS, has initiated efforts to integrate more informal businesses into the tax system. These initiatives include simplified tax regimes for small and micro enterprises and educational campaigns to raise awareness about the benefits of formalisation.
