1. Effects of Farming Tax Expenditures on Revenue
The Case of Botswana By
Tshegofatso Maruping

2. Introduction
The agricultural sector has over the years shown a diminishing role in the macro economy representing a mere 2.7% of GDP (2012)
Generally South African provides almost all of the food imports into Botswana. During December 2018, composition of imports by principal commodity groups shows Food, Beverages & Tobacco contributed 14.0 percent (P640.9 million) of total imports(P4, million).IMTS December 2018
The Government has developed and implemented major agricultural spending programs as (LIMID, 2007), (ISPAAD,2008), (NAMPAADD, 2002) With these programs, farmers receive up to 100% grants as subsidy for their farming operations
The Government also introduced tax Expenditures as one of the aids to assist the agriculture sector through provisions of the tax law
Wikipedia defines “tax expenditures as government spending through the tax code.”
Tax expenditures are defined under the Congressional Budget and Impoundment Control Act of 1974 (the “Budget Act”) “as those revenue losses attributable to provisions of the tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability...."

3. Problem statement
Agriculture sector absorbs 3-4% of the budget but public expenditure on agriculture stands roughly at 50% of agriculture’s value added. Spending is high in relation to the sector. 10 to 15 % would be more typical for African economies. (Ag PER) Botswana (2014).
According to tax collection revenues, farming tax revenue contributed 0.20% and 0.22% of assessed tax between the years 2012 and 2013 respectively. This representing 0.12% of contribution towards the total income tax in the same years. BURS (TMS).
perceived challenges exist within the farming legislation.
tax provisions to farming have proven to be administratively cumbersome and burdensome to both the tax authority and the taxpayer respectively
In all Agriculture sector though receiving tremendous aid doesn’t contribute much in terms of revenue to the revenue authority and to the economy.

4. Objectives
The paper aims to examine the impact of farming tax provisions on total revenue collection.

5. Research questions and hypothesis
The focus will be on the questions as listed below
What are the farming tax provisions available to farmers in Botswana?
What are the effects of farming tax provisions on total revenue?
What options for reform are available?
To ascertain the impact of the farming tax provisions on revenues, the following hypothesis was used;
“Farming tax provisions do not have any effect on total revenue.”

6. Literature review
Pettinger, T. (2016) stated that agriculture often appears to be one of the most difficult industries, frequently leading to some form of market failure. In the EU and US, agriculture is the most heavily subsidized industry, yet despite the cost of the subsidy it fails to address many issues relating to agriculture such as volatile prices / volatile supply, low and volatile income for farmers, environmental costs of intensive farming (negative externalities), Agriculture key component of rural life (positive externalities) and monopsony power of food purchasers.
Farm subsidies are intended to alleviate farmer poverty, but the majority of subsidies go to commercial farms with net worth’s of nearly $2 million. They are falsely promoted as saving the family farm and protecting the food supply. In reality, they are America's largest corporate welfare program. U.S. Farm policies burden American families with higher taxes and higher food prices. Riedl, B.M. (2007).

7. Methods and Data Collection
An analysis was carried out on accounts of taxpayers who applied any of the tax provisions in computing their assessable income. The data used for analysis was from 32 corporate and 37 individual taxpayer files.
These data reviews were quite resourceful as they have vital data that is detailed and from source.
The farming individual and corporate records were reviewed to collect specific and required data.
The data were analyzed using distribution tables and the hypotheses were tested using chi square test to reach a conclusion from the objectives.

8. Results
An analysis was made from the incomes, expenses and losses of the selected samples to see how the incomes are affected by either expenses or losses .
The assumption is that by whatever percentage (%) expenses reduce income; it is the percentage (%) lost in tax.
Corporates
On average, 6.83% is the estimated loss in income due to tax provisions provided under corporate tax.
Individuals
On average , 48.01% is the estimated loss from income due to tax provisions provided under individuals tax.
According to the analysis the revenue loss when examining the percentage of expense to income was on average at 6.83% for corporates, meaning for every income an average of 6.83% is lost in revenue due to tax expenditures.

9. Chi square results Corporates Individuals
Critical value
5.99
Computed chi square
Degree of freedom 2
Level of significance
0.05
Critical value
5.99
Computed chi square
23496
Degree of freedom 2
Level of significance
0.05
The alternate hypothesis is accepted, meaning farming expenditures have an effect on total revenue

10. Recommendations
From the document reviews, literature reviews, data analysis and discussion of findings, the conclusion is that farming tax expenditures do have an effect on total revenue.
The changes as per the 2015 amendment are welcome. And it is encouraged that continuous monitoring, regular reviews and evaluation of expenditures in relation to revenue is done
To consider providing expenditures to areas of focus in terms of market and for production that provides food security for the country
To liaise with related authorities
For ease of administrative cost and to assist in efficiency and effectiveness farmers be provided a dedicated division.
To limit spending on support schemes and allow the private sector to provide these to farmers
To report on the farming tax expenditures

11. THANK YOU