Botswana to Reduce VAT to Cushion Impact of Rising Inflation

Xinhua 

July 28, 2022

Botswana on Wednesday announced the reduction of the Value Added Tax (VAT) by two percentage points to help cushion the impact of the rising inflation on households and the economy.

The impact of the Russia-Ukraine conflict that erupted in February this year has been traumatic leading to global shortages of fuel and foodstuffs with consequent sharp increases in inflation globally and Botswana was also impacted, Peggy Serame, Botswana’s Minister of Finance, told the parliament in Gaborone, the capital of Botswana.

Largely driven by rising fuel prices and transport costs, Botswana’s inflation rose to 12.7 percent in June 2022, up from 8.7 percent at the end of 2021 thereby reflecting the high weight of transport costs in the consumer price index basket, according to Statistics Botswana.

Given these economic risks and uncertainties, Serame said Botswana is aware of the economic stresses on households and businesses caused by higher inflation and has considered reducing VAT to alleviate some of these stresses.

“We will reduce the rate of VAT by two percentage points from 14 percent to 12 percent for a period of six months with effect from August 1, 2022,” Serame announced.

Serame said the reduction of VAT is expected to result in inflation returning to within the Bank of Botswana’s objective range of 3 to 6 percent in the second half of 2023.