Botswana is strengthening efforts to fight against money laundering and tax avoidance schemes such as transfer pricing, base erosion and profit shifting.
Recently, the country took a step of joining the inclusive framework on Base Erosion and Profit Shifting (BEPS), becoming the framework’s 99th member.
The inclusive framework on BEPS is a group of countries that have pledged to implement measures designed by the Organisation for Economic Cooperation and Development (OECD) and G20 countries in 2015 aimed at preventing multinational tax avoidance and improving resolution of tax disputes involving multinationals.
Tax policy director in the Ministry of Finance and Economic Development, Boikanyo Mathipa told Mmegi Business that as a member of the framework, Botswana will participate as a BEPS associate, and by so doing has also committed to the implementation of the four minimum standards.
These include countering harmful tax practices, preventing treaty abuse, dispute resolution, and country-by-country reporting under transfer pricing documentation.
“Botswana is therefore obliged to conform to these standards and that may mean amendment of tax legislation where necessary,” she said.
As a start, Mathipa said Botswana will be undergoing review for standard of countering harmful tax practices this month, adding that if that review raises any legislation deficiencies, the legislation will have to be reviewed to conform to the minimum standards.
She said going forward, Botswana will be working with the OECD to implement the minimum standards.
“Botswana’s tax system will be put under scrutiny whether it conforms to international best practice which should in turn boost investor confidence and hence it has the potential to attract investment by credible investors,” she said.
According to Mathipa, Botswana’s tax legislation has some provisions that are used to tackle tax avoidance schemes such as base erosion and profit shifting, but she however said these are just general rules that are not enough to address current issues such as transfer pricing.
She further emphasised that by entering into Double Taxation Avoidance Agreements (DTAAs), also termed tax treaties, and Tax Information Exchange Agreements (TIEAs), Botswana is addressing tax avoidance issues.
She explained that a tax treaty ensures that a taxpayer is not taxed twice on the same income while it also safeguards against double non-taxation by both states where the income is sourced and by the state where the investor is a resident.
“The TIEA on the other hand facilitates exchange of tax information between contracting states and such information could assist in addressing tax avoidance and tax evasion issues,” she said.