Botswana’s 2025/2026 budget speech, delivered by the minister of Finance on 10 February 2025, introduced several fiscal strategies with significant implications for direct taxation. These changes reflect the government's effort to enhance revenue collection amid ambitious economic and infrastructural development goals. This article summarises the direct tax aspects as outlined in the budget.
The proposed budget includes two major direct tax changes that have immediate effect, and announced a further modernizing of the tax legislation that will result in more changes in the future.
First, the budget increases the personal income tax rate for top earners. In a noteworthy move to adjust direct tax rates, the budget proposes a 1.5% increase in the tax rate for top earners, up from 25% to 26.5%. This adjustment is part of a broader strategy to ensure fiscal sustainability by tapping into higher income brackets, which can contribute more substantially to national revenue without imposing undue strain on lower-income groups.
Second, the corporate tax rates also will be adjusted. The budget also outlines a 1.5% increase in corporate tax rates. This measure targets businesses, particularly larger corporations, to share a greater responsibility in supporting national development through increased tax contributions. This adjustment is expected to impact the financial planning of companies operating in Botswana, necessitating strategic adjustments to accommodate the increased tax liability.
The government is also set to undertake a comprehensive review of existing tax legislation. This initiative aims to modernise and streamline the tax system, making it more efficient and aligned with international best practices. For individual taxpayers and businesses, this may mean changes in tax compliance requirements, deductions, and possibly the introduction of new tax credits or incentives.
One focus areas in the modernizing process is the leveraging of technology. As the government enhances its digital infrastructure for the tax administration, taxpayers should be ready to embrace new technologies for tax filings and payments. This could mean transitioning from manual to online submissions, which offers convenience and potentially faster processing times.
The direct tax changes proposed in Botswana's 2025/2026 budget are designed to increase government revenue in a manner that aligns with broader economic objectives while ensuring fiscal responsibility. The increase in personal and corporate tax rates, coupled with a comprehensive review of the tax code, signifies a proactive approach to adapting the tax system to current economic realities.
Taxpayers and businesses are advised to closely monitor these developments and seek professional advice to navigate the new tax environment effectively. As Botswana continues to invest in digital infrastructure, embracing these changes will be crucial for achieving compliance and optimizing tax-related outcomes.
Watson Masikati
BDO in Botswana
The proposed budget includes two major direct tax changes that have immediate effect, and announced a further modernizing of the tax legislation that will result in more changes in the future.
First, the budget increases the personal income tax rate for top earners. In a noteworthy move to adjust direct tax rates, the budget proposes a 1.5% increase in the tax rate for top earners, up from 25% to 26.5%. This adjustment is part of a broader strategy to ensure fiscal sustainability by tapping into higher income brackets, which can contribute more substantially to national revenue without imposing undue strain on lower-income groups.
Second, the corporate tax rates also will be adjusted. The budget also outlines a 1.5% increase in corporate tax rates. This measure targets businesses, particularly larger corporations, to share a greater responsibility in supporting national development through increased tax contributions. This adjustment is expected to impact the financial planning of companies operating in Botswana, necessitating strategic adjustments to accommodate the increased tax liability.
The government is also set to undertake a comprehensive review of existing tax legislation. This initiative aims to modernise and streamline the tax system, making it more efficient and aligned with international best practices. For individual taxpayers and businesses, this may mean changes in tax compliance requirements, deductions, and possibly the introduction of new tax credits or incentives.
One focus areas in the modernizing process is the leveraging of technology. As the government enhances its digital infrastructure for the tax administration, taxpayers should be ready to embrace new technologies for tax filings and payments. This could mean transitioning from manual to online submissions, which offers convenience and potentially faster processing times.
Conclusion
The direct tax changes proposed in Botswana's 2025/2026 budget are designed to increase government revenue in a manner that aligns with broader economic objectives while ensuring fiscal responsibility. The increase in personal and corporate tax rates, coupled with a comprehensive review of the tax code, signifies a proactive approach to adapting the tax system to current economic realities.Taxpayers and businesses are advised to closely monitor these developments and seek professional advice to navigate the new tax environment effectively. As Botswana continues to invest in digital infrastructure, embracing these changes will be crucial for achieving compliance and optimizing tax-related outcomes.
Watson Masikati
BDO in Botswana