Gov’t not backing down on tax hike

The government is standing firm on its decision to raise taxes, despite mounting pressure from public service unions and sections of civil society calling for the hikes to be halted.

In a recent letter to the African Development Bank (AfDB), Vice President Ndaba Gaolathe reaffirmed the government's position, emphasising the need to enhance domestic revenue collection as a key pillar of ongoing economic reforms.

“A critical component of our reform agenda focuses on domestic revenue mobilisation and cost-cutting measures, which, among others, includes improving the efficiency of tax revenue collection,” Gaolathe wrote in correspondence to the AfDB.

Gaolathe’s letter formed part of the government's application for a P3 billion loan from the continental bank, aimed at addressing “Botswana’s short-term fiscal challenges while creating opportunity for engagement on the new Government’s medium to long-term development agenda…”

The correspondence comes amid growing concern over the rising cost of living and financial strain on public sector workers, who argue that tax increases will erode already stagnant wages. Unions have warned that the hikes could reduce disposable incomes, further dampening household consumption and slowing economic recovery.

However, the government maintains that the revenue drive is essential to close fiscal gaps, reduce dependence on mineral revenues, and fund key development priorities under the 2025/26 budget.

“Plans are afoot to modernise and simplify the tax system to make it more efficient and relevant to today's economy, hence some tax laws are currently under review,” Gaolathe informed AfDB President Dr. Akinwumi Adesina in a letter dated 14 March 2025.

He added: “Three new bills are expected in the FY2025/26 financial year; a new Tax Administration Act (simplifying VAT and income tax rules, reducing paperwork, and eliminating unnecessary filings), an updated VAT Act (reflecting current business practices), and a revised Income Tax Act (addressing global business trends and international tax issues).”

On optimizing financial resources, Gaolathe said the government aims to increase income sources, expand the tax base, and reduce inefficiencies.

He noted that the Botswana Unified Revenue Service (BURS) is rolling out several initiatives, including VAT on digital trade, an Electronic VAT Invoicing Solution, and a track-and-trace system to combat illicit trade.

To further boost domestic resource mobilisation , Gaolathe said a 1.5 percent increase has been announced for both corporate tax and the top bracket of personal income tax.

“Even with this adjustment, Botswana’s tax rates will remain among the lowest in the region. Currently, Botswana’s tax-to-GDP ratio stands at approximately 13 percent, below the African average of 16 percent and the SACU average of 20 percent,” he said.

To support these measures, he said, government will invest in technology-driven solutions for BURS to improve efficiency, enhance compliance, and enable seamless online tax collection.