Govt hikes VAT...the reaction

MBONGENI MGUNI and FREDERICK KEBADIRETSE
Staff Writers | Tuesday February 9, 2010 00:00

Yesterday, Finance and Development Minister, Kenneth Matambo, announced that VAT would increase from the current 10 percent with effect from April 01, 2010. Matambo said the decision was informed by the need to boost the national purse, in the face of lower revenues from minerals, the Southern African Customs Union and the higher deficit projected to be P12.11 billion for 2010/11. However, the Minister also increased the VAT registration threshold to P500,000, providing relief to small, micro and medium enterprises.

Introduced in 2002, VAT is a levied indirect tax, which is not regarded as a business expense as it is borne by the consumer. VAT has been pegged at 10 percent since its introduction.

Speaking outside Parliament moments after Matambo's bombshell, Botswana Confederation of Commerce, Industry and Manpower Executive Director, Maria Machailo-Ellis said the organisation was 'totally disappointed,' by government's move. She said the decision would have 'serious' cash flow implications for small businesses in particular.

'This is not the time for government to be penalising; it should rather be encouraging people to do business. It is very difficult for consumers when there has been no salary review for civil servants, and instead a VAT increment.

'We will continue engaging with government and understand, because it appears there's something we don't understand,' said Machailo-Ellis.

The BOCCIM chief said the organisation had fought hard to have government increase the VAT registration threshold.

'We are totally disappointed because while they have increased the threshold, they have also increased the VAT.'Leader of the Opposition in Parliament, Gilson Saleshando, said the increase in VAT was a sign that 'this government has failed.'

'It is a sign that this government has failed; it has failed to diversify the economy and it is failing to find alternative sources of revenue. They are now charging people for that and if nothing is done, VAT will go even higher in future.

'It is a sign of failure and desperation,' he said.

Botswana Public Officers Employees Union (BOPEU) President, Andrew Motsamai said the move to increase VAT had undermined the Bargaining Council, through which negotiations with government have traditionally been held.

'The Council has not sat to negotiate yet; we have not been able to negotiate and yet they say they are not able to give us any salary increment. Instead, they have hiked VAT - the position government has put us in is a very painful one.

'They should rather be negotiating in good faith. We cannot accept the excuse that there are no funds; if we had sat down with them, we would have told them that the best way to approach this challenge is to make money available to civil servants in order to stimulate the economy.

'As it is, banks are in trouble because very few people are borrowing, as their purchasing power has been going down steadily for years,' he said.

Motsamai said the Union's next move would be to 'force' government to the negotiating table.

Commenting on the general budget, Botswana Economics Association's Dr Jonah Tlhalefang commended government for its allocation of P200 million towards the Ipelegeng labour intensive public works programme in the 2010/11 budget.

'The budget strives to achieve social justice which will in turn, work well towards realisation of the National Vision 2010 and the Millennium Development Goals,' he said.

He however noted that government's decision to reduce the number of beneficiaries from its destitutes programme would cause problems in future, as these would soon be needy again. Tlhalefang said government should have provided these former beneficiaries with skills training in order to enable them to cope with life after the benefits of the destitutes programme.

Youth activist, Gaontebale Mokgosi said the budget was silent on employment creation for youths, yet last year's State of the Nation Address had promised government action on the challenge. He said district sport festivals and the Constituency Football tournaments were a temporary solution to the challenge of social vices among the youth.

'Instead, the government should be investing in projects that can be sustainable in the long term to these youths, such as sports academies which can be used to help the youth make a living out of sport,' he said.

Mokgosi also said the P200 million budgetary allocation to the Directorate of Intelligence and Security was misplaced as the organ was not benefiting the country's economy in any way and will rather lead to a nation of spies.

'All hope is not lost, however. The civil society should hold their placards high and hope that funds from the fiscus are better prioritised.'