Over 60 percent of waged employees do not earn enough to be taxed
Over 60 percent of the wage-earning public pay nothing to the taxman as they fall below the Income Tax threshold, a recent study has revealed.
A Botswana Multi-topic Household Survey (BMHS) discovered that of the country’s waged employees, 63.8 percent do not earn enough to trouble the taxman.
Of those who remit something to the taxman, the report indicates that 10.2 percent fall in the range of less or equal to P500. Those that pay between P501 to P1, 000 and P1, 001 to P2, 000 make up 3.7 percent and 4.6 percent of the salary-earning community respectively.
The same report indicates that over 70 percent earn less than P4, 000 a month.
Of the over 500, 000 employees that the survey covered, it was found that 25.7 percent earn between P1, 001 to P2, 000, which rules them out of any income tax deductions.
It also found that 24.9 percent take home between P501 to P1, 000 every month in wages, whilst 5.3 percent earn less than P500.
Local tax laws require those earning P36, 000 per annum or P3, 000 per month to pay a form of tax known as Pay as Your Earn (PAYE).
The report further revealed that 74.2 percent of waged employees fall under formal employment. The formally employed are described as those that are liable for taxation, pension or gratuity, paid leave, maternity leave, medical services and so on.
Those that fall under informal employment – 25.8 percent – are not subject to national labour legislation, income tax, social protection or entitlement to other employment benefits like severance pay or annual leave.
The BMHS report puts the unemployment rate at 17.6 percent –a figure that has been criticised as a false reflection of the current situation in Botswana.
Speaking to Voice Money in an interview this week, a tax expert noted that waged employees who do not pay income tax still pay another form of tax: Value Added Tax (VAT).
Managing Consultant at Aupracon Tax Specialists, Jonathan Hore said the VAT system is designed such that no-one can claim to be immune to it.
Hore further noted that although the number of those not paying tax is extremely high, this has no effect on government revenues as it is not required to collect tax from them in the first place.
“In fact, many tax practitioners feel that the P36, 000 per annum figure is now too low and has been overtaken by inflation, meaning that it needs to be revised upwards. In my view, anyone earning P5, 000 and below should not pay PAYE as the cost of living is now high,” reasoned Hore, adding he hopes the Minister of Finance and Economic Development, Kenneth Matambo will revise this threshold in the 2019 -2020 budget presentation due next month.
The figure was last revised at the start of July 2011.