Botswana struggles to collect taxes � report
Pauline Dikuelo | Friday July 29, 2016 18:00
In 2012, Botswana collected direct and indirect tax amounting to $4.45 billion (P47.9bn), attaining the 18th position out of 45 African countries, according to the 2015 Africa Capacity Report (ACR).
Earlier on, the Botswana Unified Revenue Service (BURS) admitted that it still faces some constraints in collecting the optimum tax and customs revenues that can potentially be collected. The tax agency’s commissioner general, Ken Morris was quoted as saying that inadequate capacity to undertake more enforcement activities to cover all areas of the country is one of the constraints that the agency is facing. He has also cited other constraints such as public ignorance of the importance of tax, which he said translates into low compliance levels, as well as the lack of an enterprise risk management function for increased efficiency in collection.
The ACR says the money that was transferred by foreign workers in Botswana to their home countries amounted to $18 million (P193.8m) with net resources flows amounting to $2.54 billion (P27.3bn) and about P200 million illicit financial flows.
Also known as remittance, the transfer of money by foreign workers competes with international aid as one of the largest financial inflows to developing countries.
“Tax performance in African countries leaves much to be desired, tax systems are still inefficient, costly and significant amounts of revenue are lost to tax exemptions and tax avoidance,” reads part of the report.
It also stated that countries that are not resource-rich tend to have a more balanced tax mix and have been able to increase tax collection from direct taxes which include personal and corporate income as well as indirect taxes, value-added, sales, excise unlike the resource-rich ones that are not making enough effort to collect taxes.
However, the report suggested that investing in the capacity of revenue authorities must be part of a broader fiscal reform agenda that includes simplifying and rationalising tax systems.
“More and better-trained staff must be hired by the revenue authorities and be retained with the right financial incentives and they must be allowed to do their work without political interference. More needs to be done to build the capacity of revenue authorities to engage with taxpayers and foster a culture where taxation is seen as contributing to essential services. This means that governments need to be transparent and efficient on expenditures,” the report added.
The report also urged citizens to be aware of what services they are getting in return for their tax contributions and so governments should be transparent about programme expenditures and invest in tax awareness and education campaigns.
According to the most recent data for 2012, illicit financial flows from Africa were higher than remittance inflows ($82.5 billion versus $51.4 billion) and several countries are now losing large amounts to those flows relative to the tax revenues they collect.
Despite the global financial crisis and a slight decline in 2009, remittance flows have continued to increase and have been higher than official development assistance. Resource rents to Africa reached a record $234.7 billion in 2008, only to dip to $120.6 billion a year later because of the global financial crisis.
“Mobilising domestic resources and curbing illicit financial flows will no doubt be important in structural economic transformation, growth and poverty reduction and examining their capacity dimensions is therefore timely,” it added.
Further the report stated that none of the countries surveyed showed evidence of successfully combating illicit financial flows.
This fifth annual ACR report showcases the capacity imperatives for mobilising domestic resources in African countries by revealing binding constraints associated with domestic resource mobilisation including a very narrow tax base, high levels of capital flight, tax evasion and avoidance, proliferation of tax exemptions, lack of legitimacy of tax administrations, relatively low penetration of the banking sector and lack of human technical legal regulatory and financial capacity to deal with illicit financial flows.
According to the report, African countries collected $508.3 billion in tax revenue in 2013, a huge increase from $123.1 billion collected in 2002.
Rising tax revenue in Africa is also highly concentrated in few countries such as South Africa, Nigeria and Algeria and these resource-rich countries tend to have a more unbalanced tax mix than non resource-rich countries.