VAT increase hits consumers hard

BABOKI KAYAWE
Staff Writer | Monday April 12, 2010 00:00

Kagiso Kagiso is of the view that the government's decision to increase VAT was ill-considered as the cost of living was high already. A drinker, Kagiso says the price of Chibuku has gone up by 25thebe.

Agnes Major fells the sting of VAT in her baby feed, especially First Growth formula which she says she used to buy for P14.95 but now costs P17.95.

'We have to compare prices thoroughly now,' she says.

Pearl Tsapoga, who dscribes herself as a low-income earner, says the recent VAT increment has added to the suffering of people like herself, especially that it came when there was no salary increment.

'Life has become tougher for us low-income earners as we have to part with more from nothing,' she laments.

Tshenyego Rebothako sees the VAT increase as an opportunity for people to revive the spirit of self-reliance and to look more seriously at the agriculture sector to make Botswana food secure.

The VAT increase was announced by the Minister of Finance and Development Planning, Kenneth Matambo, in his budget speech last February. He said the decision was informed by the need to boost the national purse in the face of declined mineral and SACU revenues and a projected P12.11 billion deficit for 2010/11.

VAT was first introduced in Botswana on July 1, 2002.It is an indirect tax levied on the supply of goods and services consumed within Botswana. It is a consumption tax because the amount paid is directly related to purchases one makes. The tax is not a business expense because it is borne by the consumer.

It is estimated that the government will collect about P4.5 billion per annum from the two percent increase on VAT, an increase in revenue of P700 million. While the government has been heavily criticised for raising VAT, which is expected to add 1.7 percentage points to inflation from the second quarter of 2010, Minister Matambo said Botswana's inflation would remain among the lowest in the region even after the increase.