Possible Value Added Tax Simplification Measures for Small Businesses in Botswana –Lessons from New Zealand
The Value Added Tax (VAT)1 system in Botswana, introduced in July 2002, has since gone through several reforms. This includes: an increase in the VAT rate from its introductory rate of 10 per cent to the current 12 per cent in 2010; two increases in the registration threshold from the initial P250,000 (AUD32,000)2 to P500,000 (AUD64,000) in 2010, and from P500,000 (AUD64,000) to the current P1,000,000 (AUD128,000) in 2015 and; an increase in the number of zero-rated and exempted goods and services. Such reforms complicate the VAT system and increase VAT compliance costs, especially for small businesses. This paper explores possible VAT simplification measures for small businesses in Botswana, using the New Zealand GST system as a benchmark for a simplified VAT system. The New Zealand GST system is globally known as a model system, which has influenced GST designs in many countries. This study concludes with VAT policy implications for Botswana and potentially for similarly placed countries. The study recommends: broadening of the VAT base, reduction of VAT returns filing frequency and introduction of cash accounting for small businesses, as measures to simplify the VAT system in Botswana.