Get ready for the new normal

Mmegi Editor | Friday December 13, 2019 13:01

The ministry’s quite preliminary proposals are particularly off-putting as they come at a time when an uncomfortably high number of Batswana are struggling with unemployment, poverty and access to economic opportunities.

The facts, however, are that higher taxes and fewer exemptions will inevitably become the new normal in an era where the country’s main revenues, such as from diamond mining, are on the decline.

NDP 11, which ends in March 2023, is forecast to incur at least P18 billion in deficits, while the sources of plugging this gap each have their own Ts and Cs. Invariably, the deeper a country sinks into fiscal deficits, the costlier the sources of its debt become and the more sacrifices it has to make, in some cases mortgaging future generations’ economic aspirations.

The history and structure of the country’s economy has tended to shield citizens from the worst of economic vagaries.

In their prudence, the country’s economic forefathers sought to ensure that the diamond miracle lifted citizens from the low-income base in which many were at the time of Independence.

By necessity this would include providing widespread social safety nets, protections and subsidies to ensure that basic services such as health, education, water and sanitation and in future, electricity and telephony, would be accessible to as many citizens as possible, for their development.

Today, the public service is replete with subsidies, zero ratings and exemptions of various types, while, as finance technocrats repeatedly remind us, our various tax rates remain amongst the lowest in the region. The most inescapable of these taxes, the Value Added Tax (VAT) paid by everyone employed or unemployed, has seen its rate revised only once, in 2010, since its introduction in 2002.

Personal income taxes were loosened in July 2011 to exempt everyone earning less than P36,000 and these have never been revised since. For VAT, nine years have passed since the revision while for personal income tax, the value of P36,000 today the same as in 2011? Besides taxes, the public finance management system is riddled with wastage and misdirected albeit noble subsidies. A prime example is the electricity and water tariff arena where all users benefit from subsidies regardless of their ability to afford cost-reflective tariffs. In agriculture, the less said about the billions of Pula spent on blanket seasonal inputs and inevitable drought relief each year, the better.

Add the growing menace of corruption, from petty cash and imprest trickery to the grand-scale efforts that have been revealed by the courts in recent years, and the state of public finance management indeed looks precarious.

Yes, government should do more to sensitise Batswana about the inevitability of being asked to dig deeper into their pockets in the very near future. But at the same time, however, government needs to tangibly and repeatedly commit to the sacrosanct privilege of properly managing these resources for the benefit of all.

Today’s thought

“Taxation is a social contract between government and its citizens. If taxes are not used for what they should be, then we are making Batswana poor”

– BURS acting commissioner general, Segolo Lekau