Keorapetse advises against tax rise
Staff Writer | Friday February 26, 2021 15:56
He suggested to the Minister of Finance and Economic Development to, instead, enhance the capacity of the Botswana Unified Revenue Service (BURS) to collect taxes effectively and efficiently and ultimately improve entire government ability to collect revenue.
Contributing to the budget debate this week, Keorapetse said the inability of government to collect revenue has been a problem for a long time. “All businesses of a size that BURS could determine, must have payment terminals in the form of Electronic Data Capture Machine/Card swipe machine linked to BURS to monitor transactions. Introduce high financial and or bank transactions taxes,” he said.
He also advised the Minister Dr Thapelo Matsheka to abolish pink tax and introduce wealth tax to address income and wealth inequalities. “Introduce weighted taxes for luxury goods and revise sin taxes. Raise corporate income tax from 22% to 30%. Deal firmly with transfer pricing.
Think about employment tax incentives for companies that employ young people,” he said.
The 1999 abolishment of foreign exchange controls must be rescinded or at least reviewed. He said the arrangement has enabled profit repatriation and illicit financial flows. The idea that the abolishment would attract Foreign Direct Investment FDI) was inaccurate, instead Botswana is a haven for money laundering. “We’ve lost a lot of would-be investment in profit outflows. The Companies Act and other related laws should make it illegal for entities that are incorporated in countries that have non-disclosure laws to own in part or in whole companies registered in Botswana,” argued Keorapetse.
The MP said government should make it mandatory for companies that sell services or products within Botswana to have their financial transactions go through the local banking system. “For Selebi-Phikwe West, take for example Reconnaissance Energy Botswana…they list Reconnaissance Oil & Gas Corporation (1850150) which is registered in Canada as their sole shareholder. And then they supply a certificate of incorporation from the British Virgin Islands. And Companies and Intellectual Property Authority (CIPA) accepts all this as okay and even publish on their website.”
Transfer pricing remains fairly unregulated in Botswana, for instance, he said, adding that big corporations buy and use services from many companies owned and controlled by their directors or executives.
There is no how the BURS verify the true value of the goods and services rendered, therefore such entities can easily manipulate the value of taxable income, effectively paying tax of their choosing. Similarly, in the luxury safari market in the Delta, most of the corporations sell their packages through foreign-based agencies that they directly control or own, like in the scenario he has given.
“BURS cannot verify the true value of these transactions, so, the locally registered arm of the tour operator can easily manipulate their taxable income. One measure to combat this is through establishment of strict transfer pricing reporting legislation or regulations, the tax law can be amended to close that gap,” he said.
He said as the Umbrella for Democratic Change (UDC) they strongly suggest an overhaul and revamping of the entire anti-graft strategy through formulation and codification of an Anti-Corruption Policy. Government, he added, should reform all relevant anti-corruption statutes, starting with the Anti-Corruption and Economic Crime Act. “We are of the view that particular attention be paid to Covidpreneurship, bribery, insider trading, trading in influence, conflict of interest, whistleblowing, targeted lifestyle audits, corporate governance and freedom of information. We suggest strengthening of democratic oversight mechanisms and insulation from the executive of the DCEC, Auditor General, Ombudsman, DPP and Parliamentary Committees,” he concluded.