IMF study spots missing VAT billions

Mbongeni Mguni | Monday August 10, 2026 06:00

The team visited the country between October 27 and November 7 and has passed its findings to the BURS, indicating that key revenues running into millions of pula are going uncollected due to non-compliance.

According to the IMF team, the country’s overall VAT gap trended upward in the period between 2017 and 2024, driven by a growing compliance gap. The VAT gap is the difference between what the BURS could be collecting optimally and what it was actually collecting during that period.

In 2017, the total VAT gap was estimated at 4.9 percent of GDP and despite an improvement in 2018, the figure rose to 5.8 percent of GDP in 2024. In terms of absolute figures, the 5.8 percent of GDP in 2024 represents about P13.1 billion, using government’s figures for GDP at current prices in 2024.

“The compliance gap accounts for the majority of this increase - it rose from two percent of GDP in 2017 to 3.5 percent in 2024. “In relative terms, the compliance gap worsened from 36.5% of potential VAT collection in 2017 to 47.7% in 2024,” the IMF researchers said.

The efficiency of tax collections has become an urgency for government as the prolonged slump in diamond sales affects budget revenues. This financial year, government expects to receive P15.1 billion in VAT, up from about P13.7 billion in the 2025–2026 financial year.

A tax gap analysis by the BURS in 2021 indicated that up to 60% of those who were supposed to be paying various types of taxes were not. While the tax agency has been reluctant to point out sectors which could be dodging their tax obligations, experts who previously spoke to BusinessWeek said plenty of loopholes existed for tax evasion and avoidance.

The areas include large businesses that actively engage in tax avoidance where their liabilities are lessened, as well as VAT fraudsters.

The IMF team said its investigations pointed to certain sectors where VAT non-compliance was occurring in significant concentrations.

“While data limitations prevent a perfectly precise breakdown, the analysis indicates that VAT non-compliance is heavily concentrated in the trade and transportation sector and the mining and manufacturing sector. “These sectors together generate a large share of the unpaid VAT,” the IMF said.

Researchers said potential reasons for heavy non-compliance in these sectors include a high presence of hard-to-tax activities such as informal traders as well as complex value chains in mining/manufacturing that challenge BURS’s enforcement efforts. By contrast, some other sectors such as financial services and construction showed smaller compliance gaps.

The IMF said internationally, Botswana’s VAT gap is not abnormally high, but the negative trend is concerning. The estimated compliance gap, whilst worsening, is still below the average outcomes observed in comparable emerging market and African economies where the IMF has applied similar methodology and conducted studies.

“Going forward, BURS should prioritise strengthening its analytical capacity by establishing a dedicated team responsible for VAT gap analysis. “The results of VAT gap analysis should be systematically integrated into BURS’ compliance risk management framework, using sectoral and trend insights to inform risk profiling, audit prioritisation and targeted compliance interventions, complemented over time by bottom-up analytical work.”

The BURS is due to roll out VAT e-billing around the country, to enhance compliance and collections. The tax agency has been securing service providers and finalising regulations around the initiative, which will require VAT-registered entities to set up approved systems and devices that link directly with the BURS.