Botswana’s New Tax Plan Sounds Noble—But Is It Dangerous?

Botswana’s Vice President, Ndaba Gaolathe, recently announced plans to increase taxes as a means of funding various social policies. The UDC must be commended for its dedication to uplifting the vulnerable. However, good intentions do not always lead to good results. Increasing taxes may seem like an obvious solution to the nation’s financial predicament, but it may not be the most effective. In fact, if the government continues down this path, it may worsen the situation.

There will be many cautions offered in this article, but the first one must be given to the reader. Many of the criticisms in this article will align with common capitalist arguments, but that is irrelevant. The country’s concern should be what works. Botswana, for example, offers free healthcare while private healthcare continues to thrive. The country thus transcends hardline capitalist-socialist boundaries.

The Effects of Increasing Taxes

Tax policies may be divided into two broad categories: those that increase tax revenue and those that do not. While it may seem counterintuitive, tax cuts have, in certain circumstances, been proven to increase tax revenue. Of course, that will not be true of the minor income tax increments the government plans to introduce. But it may prove true if this is a small step toward more substantial tax hikes. The country waits in eager anticipation for the new Tax Administration Act but may lament its content when it is published.

Tax increments also assume the government will spend our money better than we will. If crippled by taxes, people are less likely to try out products from smaller businesses, as they will have less money at their disposal. Furthermore, an increase in corporate taxes may simply result in increased prices for corporate goods. A company’s main objective is to increase profits, not to please the public. The government should, therefore, proceed with great care when adjusting tax rates.

All this being said, the new administration must be applauded for its commitment to effecting social change.

The Fine Line Between Social Change and Social Stagnation

Another concern is dependency. The new government’s answer to many of the country’s issues has been, “We will give you more money.” As a potential recipient of these benefits, I find it difficult to complain. However, in the long run, the UDC must ensure it finds more sustainable solutions to the country’s woes.

As things stand, the poor quality of life experienced by many in the country may justify these measures. Creating jobs, for example, takes time. While we wait, one can understand the decision to extend a helping hand to those in need. Nevertheless, solutions like an unemployment allowance cannot be permanent, lest people are discouraged from working and being independent. As a springboard to financial stability, though, these initiatives cannot be gainsaid.

Understanding the President’s Remarks

In 2021, the current President criticised the BDP’s decision to increase Value Added Tax (VAT) during a period of economic turmoil. In such situations, he counselled, the government should decrease taxes instead. Some see the UDC’s decision to increase taxes as a direct contradiction of the President’s earlier remarks, but that is mistaken.

VAT is applied indiscriminately, affecting both the poor and the rich. The UDC’s proposals, however, are targeted mainly at the wealthy and, therefore, cannot be said to contradict the President’s earlier sentiments. In any case, there is nothing laudable about refusing to change your position in light of new evidence. If President Boko made a U-turn, it was one done with the country’s best interests at heart.

Therein lies the rub: the best interests of the country are not necessarily the best interests of the government. The average Motswana should not care about the government having full coffers if none of those funds are used to improve the lives of the population. And that is the heart of this article, a tree is judged by its fruits, and the new administration will be judged by the results it produces.

This, more than anything else, should dictate our tax policies.