Miners� refunds pull down VAT income

| Friday February 26, 2016 17:24

According to Botswana Unified Revenue Service (BURS) VAT collections are estimated to decline from their original budget by P1.17 billion in the current financial year.

According to BURS communications specialist, Refilwe Moonwa for the period April to December 2015, the mining refunds stood at P1 billion because production from the mining sector is zero-rated hence they can claim refunds even when no output is being produced.

“The sector is capital intensive and during the period under review, we have seen new entrants into the industry.

“Note that before the actual production, companies spent huge sums of funds procuring equipment and preparing the mining ground,” she said. 

Moonwa added that some mining houses were undertaking some scheduled maintenance hence an increase in their costs, while others were doing some infrastructural expansions.

“You should note that in VAT, an increase in the costs of a zero-rated entity leads to an increase in refunds,” she added.

The rise in refunds has been a growing concern for BURS leading to the service to implement number of interventions to authenticate the refunds.

In the previous financial period, the refunds also grew significantly by 31.2 percent to P2.89 billion.

When presenting the 2016-2017 Budget Speech, the Minister of Finance and Development Planning, Kenneth Matambo said the mining sector contributed to the slow growth in the domestic economy.

“Growth in other non-mining sectors is also estimated to slow down during the year, reflecting the effect of the water and electricity shortages on domestic economic activities,” he said.

He mentioned that the mining sector, which accounts for a quarter of the domestic output, is forecast to grow by 0.6 percent in 2016 and a further 0.7 percent in 2017, compared to a decline of 14 percent in 2016.