Wealth tax debate intensifies as rates rise
The recent tax increases have intensified the debate around the introduction of a wealth tax to help relieve the burden on ordinary Batswana who are struggling to make ends meet amidst the upsurge in living costs, BusinessWeek has learnt.
A debate on introducing a wealth tax in the country has been simmering in the public discourse for years, as inequality levels have grown to be amongst the worst in the world.
Analysts have said the recent increase in VAT to 14%, as well as a higher fuel levy, electricity tariffs and the new sugar and carbon taxes, will only increase inequality in a country where official studies show that 70% of all employed people earn less than P4,000 per month.
On the other end of the scale, authoritative data indicates that by 2020, the country had two individuals with net assets of more than $100 million (P1.1 billion), as well as the 1,800 dollar millionaires.
Commentators have said in its attempts to increase flows to its coffers, government could have introduced a wealth tax to lessen the impact on ordinary Batswana, especially since the subsidies in health, education and electricity that the taxes pay for are also freely accessed by the rich.
Last week in Parliament, Selebi-Phikwe West legislator, Dithapelo Keorapetse said it was important for authorities to consider introducing a wealth tax in the country.
“Consideration should be made to introduce wealth tax (which would be) a tax based on the market value of assets that are owned and these assets may include but not be limited to cash, bank deposits, shares, fixed assets, private cars, assessed value of real property, pension plans, money funds, owner-occupied housing and trusts,” he said.
“Apart from addressing inequalities, wealth tax can increase government revenue, add to economic growth, encourage investment, for example, by coercing the productive use of assets and can have other positive social effects.
“We can draw lessons from countries such as Argentina, France, Spain, Netherlands, Norway, Switzerland and Italy amongst others on how they implement this tax. “We should explore this type of tax and implement it in a way that would not result in capital flight and other possible unintended results.”
For his part, local tax expert, Jonathan Hore told BusinessWeek that while wealth taxes can be used to counter inequalities and distribute benefits to the masses, the introduction of such measures in the country was untimely.
“Given the new taxes that were introduced to bolster domestic tax revenue generation following 20212022 budget, my view is that it is not ideal to introduce further taxes as taxes must not be too burdensome such that people, especially the wealthy, think of leaving the country or other ways of minimising them.
“It is known that taxpayers respond to a tax regime, which they feel does not squeeze them too much,” he said.
Hore added the challenge with high taxes is that they make the populace think of minimising the taxes some even through illegal means as a protest against high taxes. He, however, said efforts should be directed towards increasing collection of already existing taxes as well as other measures.
“These include introducing a 15% withholding tax on any trader or company dealing with any person registered with BURS if the supplier does not have a tax clearance certificate.
“In other words, before any business pays a local supplier of goods or services, they must ask for a tax clearance certificate, failure of which they will deduct 15% WHT and take it to BURS.
“This will without a doubt ensure that all taxpayers who are currently non-compliant flock to BURS to clear their debts and in the process increase the amount of corporate tax, PAYE, VAT and other-withholding taxes collected by BURS.
“This is not an additional tax, but simply a mechanism meant to ensure that the current taxes are complied with. No one will think of relocating from Botswana simply because they are non-compliant,” he said.