Tax dodgers swindle BURS P9.2bn
Pauline Dikuelo | Friday February 1, 2019 18:00
Known as trade misinvoicing, the trick involves fraudulently manipulating the price, quantity, or quality of a good or service on an invoice submitted to Customs, in order to pay less tax or face a lower tax obligation.
Companies benefiting from tax incentives also inflate their export invoices in order to improperly claim benefits as well from tax authorities.
In 2015, the global average of trade misinvoicing was 18% of total trade but for Botswana, the figure for that year was nearly 32%, making the country the world’s third worst after Sierra Leone and Georgia.
The latest data is contained in Global Financial Integrity’s (GFI) report on illicit financial flows, focusing on trade misinvoicing. GFI, a US-based NGO, is the world’s foremost authority on illicit financial flows, compiling data from United Nations (UN) and International Monetary Fund (IMF) reports to regularly produce the world’s most authoritative studies on tax evasion.
The current report, released on Monday, contains the latest confirmed trade misinvoicing data, which is for the year 2015.
According to the IMF, Direction of Trade Statistics (DOTS) contained in GFI’s report, companies and individuals in Botswana got away with diverting US$885 million through the manipulation of import invoices in 2015.
Another US$610 million (P6.4 billion) was diverted through the manipulation of export invoices during the same year.
Using COMTRADE data from the UN, the value of potential taxes diverted through import invoice manipulation in 2015 drops to US$132 million (P1.4 billion) while that of export invoices drops to US$26 million (P270 million).
“Sub-Saharan African countries had the highest propensity for trade misinvoicing during the 10 year period of the study which equates to an estimated $84 billion in illicit flows due to misinvoicing,” reads GFI’s report. GFI researchers said illicit financial flows in developing countries were fuelled by a lack of transparency in the global financial system that encourages the use of tax havens, secrecy jurisdictions, anonymous trusts and shell companies to hide and launder the funds.
The NGO suggested that countries enhance the exchange of tax information and demand greater transparency amongst multinational companies.Botswana has taken steps to tighten the flow of illicit finances into and out of its borders, with laws requiring the re-registration of all companies onto a public online system where all shareholders and even beneficial shareholders are disclosed.
In addition, new laws have done away with the dormant status for companies; meaning companies are required to either be active or inactive.
The Finance Ministry is also reviewing the International Financial Services Centre framework, which various studies and agencies have pointed to as a potential source of illicit financial flows.
However, a major source of trade misinvoicing remains the cash-rich and thriving second hand vehicle arena, where the BURS still struggles to ascertain true import values and accurate tax obligations.