Higher taxes, better collections or both?
Mbongeni Mguni | Monday February 23, 2026 13:03
Having started off the budget preparation season with warnings about the need for austerity and belt-tightening last December, Finance Minister, Ndaba Gaolathe, increasingly spoke about the need for greater efficiencies in public finances, including optimised collections.
“One of the things that we are performing poorly in as a government system is actually our revenue collection systems,” he said at the pitso for general stakeholders late in January. “So, forget about increasing taxes and increasing fees, but just optimising what's already on the table like our systems for example. “Not to scare you but I have to confess that you find that the custom system doesn't talk to the income tax system and that the local government collection system doesn't talk to the executive government system. “We are doing work around digitalisation and we believe if we do it right as one unified system, it will make a big difference without increasing fees and without increasing taxes.”
Rather than a shift from one focus (austerity) to another (optimised collections), analysts believe Gaolathe’s approach is not “either or” but “both”.
This approach can be seen in a government gazette published on December 15 with plans for higher tax rates on personal and corporate incomes, as well as IFSC companies.
Under legislation set to be debated in the current sitting of Parliament, the corporate income tax rate is due to increase by three percentage points, while the rate for IFSC companies will increase from 15 percent to 17.5 percent. The top rate for personal income tax will be increased from 25% to 27.5%, affecting those earning P33,333 and above.
Higher domestic resource mobilisation has been a theme of the budget since at least the pandemic and has involved the introduction of new taxes such as the one on sweetened taxes and plans to tighten loopholes in public finances, particularly around wastage and abuse.
In addition, from April, the BURS is due to roll-out the long-planned electronic billing system for Value Added Tax (VAT) while also debuting the digital services tax which is a form of VAT on local consumers of digital services such as Netflix and Amazon, as well as remote services such as external attorneys.
The Finance Ministry also wants to reduce the number of goods and services zero-rated for VAT, heeding a suggestion that has been repeatedly made by the International Monetary Fund, amongst others.
Zero rated goods include millet grain, millet meal, wheat grain, maize cobs, flour, sugar, maize meal, as well as cooking oil, LPG gas, white bread, salt and others.
The higher rates, new taxes and streamlined zero ratings, are all designed to help improve the quantum of resources government can raise within its own borders, an area comparatively easier to control than variable mineral exports.
For Gaolathe, there’s a thin line to thread between austerity and higher domestic resource mobilisation.
“This budget tells our people that the difficulties we face are not a verdict on our future, but a call to responsibility and resolve. Fiscal prudence is not austerity for its own sake.” He added: “Taxation is a not form of punishment. It is a collective investment in our shared development. “Improving revenue performance is not simply about raising tax rates.”
Fiscal authorities say the urgent need to optimise domestic resource mobilisation can be seen in in the current collection rates, when compared with other countries. According to figures shared by Gaolathe, the government’s revenue collection is about 15% of the Gross Domestic Product (GDP), compared to Georgia and Morocco who are hovering at about 25% of GDP.
“There are many countries like Georgia and Morocco who were behind us and were collecting less than us, but just as a result of putting in place basic systems that talk to each other, they are now plus minus 25 percent collection. “If we were to get our systems right, we should be able to significantly augment our collection without over-stressing the already stressed population.”
While few can argue against improvements in revenue collections, it is the plans around taxes that have triggered concern across the economy.
The private sector has long complained that government maintains a “hidden” arsenal of taxes masquerading as different types of levies on different types of activities. From the National Electrification levy, to various training levies, fuel levies, alcohol levy and numerous others, the private sector says it is already saddled with hidden taxes.
Critics of the numerous levies say besides being an additional burden on doing business, the funds collected from the levies are utilised without fully involving those who contribute. In addition, while the levies are managed by fund orders, there have been numerous instances where the monies collected are diverted, legally, to causes completely outside the fund order.
The latest proposals, particularly the corporate tax increase, has raised hackles in certain corners of the economy, particularly in the mining and tourism sectors.
“Mining and tourism are the most taxed sectors of the economy already,” an analyst told Mmegi this week. “In tourism, you have royalties, fees, lease fees that go to the land board, community fees, the bed levy and others. “Mining has similar royalties and other charges at every turn as well as the costs of heavy compliance. “And yet, these are the two major foreign currency earners for the country and also high employers.”
Speaking at the First National Bank Botswana post-budget review, tax consultant, Tumelo Rannau, had a word of advice to fiscal authorities.
“One thing we always get wrong as government and people is that we try and increase tax rates on people when there’s pressure on revenues. “It seems like we have not learnt anything because when we have shocks, we try and increase taxes. “There are other ways of ensuring you collect more without necessarily increasing rates. “We have said these include improving efficiency in collections and making it easy for people to comply and for you to collect. “This will be a shared responsibility, not only for government but also for individuals and businesses to be proactive when it comes to compliance,” he said.
For Gaolathe, the latest round of tax increases and new taxes, while painful, can be accommodated by the economy. Fiscal authorities point out that even with the new rates, Botswana remains amongst the lowest taxed jurisdictions in the region.
According to figures quoted during the budget speech by Gaolathe, Botswana’s tax to GDP ratio declined by 0.4 percentage points from 13.8 percent in 2022 to 13.4 percent in 2023, remaining below the African average of 16.1 percent and significantly lower than the SACU average of 20.5 percent.
The private sector has rejected the oft-quoted argument that Botswana has a lower tax burden than its peers, noting that besides the numerous levies, an economy where more than 80% of enterprises are SMEs cannot afford the tax burden being demanded by government.
Fiscal authorities and the private sector are due to exchange views on the tax changes at an upcoming Tax Pitso, that Gaolathe says will support “growth friendly tax laws and operational infrastructure that minimises economic distortions, strengthens efficiency and builds public confidence”.