Answering a question from Kgosi Toteng Ndzonga of Tutume region in the ongoing Ntlo ya Dikgosi sitting, on behalf of Minister of Finance and Development Kenneth Matambo, Assistant Minister of Local Government and Rural Development Botlhogile Tshireletso said government has set its broad policy objective to maintain a wide tax base with very few exemptions at a low rate of VAT so as to reduce the impact of the tax on consumers. "The policy enables the government to mitigate the costs that would have to be borne by consumers if the VAT rate were to increase," said Tshireletso. She further explained that if electricity connection for horticultural projects was to be exempted from VAT, the government would suffer a revenue loss which government may be forced to recover through other means, such as an increase in the VAT rate on other goods and services, in order to collect the same level of VAT revenue. "Higher tax rates would adversely affect households and businesses and this must be avoided.
Tshireletso reminded Dikgosi that in 2011, the government amended the VAT Act to exempt a wide range of farming equipment from VAT. She says this has resulted in revenue loss for the government and stated that the exemption of electricity consumed by horticultural projects from VAT would lead to increased tax expenditure and unintended complexities in the administration of the tax, given that other businesses also depend on electricity supply as an input.
