The long established gap between the rich and poor in the country is worsening as recent tax and tariff increases push ordinary Batswana beyond their limits, while some of the wealthy continue to evade their share of the tax burden, thanks to a toothless Botswana Unified Revenue Service (BURS).
An authoritative report recently estimated that 200 more people had become US dollar millionaires in Botswana during 2020, a year in which ordinary citizens struggled against the COVID-19 pandemic and its effect on livelihoods. On the other end of the scale, meanwhile, Statistics Botswana, estimates that at least 67,000 people, most of them aged between 25 and 29 years old, lost their jobs or businesses due to COVID-19 last year. The taxes that were recently reviewed include Value Added Tax up to 14%, a new sugar levy, and raised fuel levy to P1, which in turn increased pump prices by P1. In addition, water and electricity tariffs have gone up, as have Botswana Housing Corporation rentals.
Most of the increases are under what government calls “domestic resource mobilisation,” which refers to squeezing higher revenues from local sources in order to fund the budget. The 2021/22 national budget is expected to suffer a P6 billion shortfall and government’s reserves are running threadbare due to COVID-19 expenditure last year. Highly placed sources at the BURS have said some of tax reviews would not have been necessary if tax evaders and avoiders in the economy were being properly pursued and brought to account. It is understood the BURS has just 20 investigators in its Investigation Compliance and Enforcement (ICE) Unit, a situation that is allowing wealthy tax evaders off the hook.
“The government instead of increasing taxes should have focused on improving BURS systems,” a highly placed insider close to the tax agency told Mmegi. “Investigators are said to be few chasing billions that could have been paid as tax.
“There should be many more employees and the BURS must admit that its customs system, though it cost a lot of money, should be improved. “As things stand, only those who have been paying tax will continue to do so while the evaders will continue to get richer and Batswana sink deeper into poverty.”
In recent years, the BURS has been criticised for failing to successfully prosecute any major tax evasion cases, even though various reports, including those from international illicit financial flow monitors, indicate rampant tax leakages.
BURS insiders say foreign-owned businesses are mainly the culprits in exploiting these enforcement lapses to send millions of pula out of the country on a daily basis. “The problem starts at the borders with manipulation of the BURS system, which is not intelligent enough to detect some obvious under-valuing, for example. “There are also officers there who allegedly connive with customs clearing agents.
“The problem of leakages is massive and BURS has since pounced on many businesses who fail to declare rightfully. These are mostly foreign-owned operations and they have mastered the whole system of declaring only a small amount of what they are due to pay as they ‘fake’ invoices,” the insider said. Other analysts said besides direct tax evasion, the country’s wealthy were also benefiting unfairly in a time of crisis, as their unwarranted presence in government subsidies raised their overall cost and necessitated tax increases.
“The wealthy also get subsidised water, electricity, education and health, even though they can pay for it,” an analyst said.
“By providing for everyone and not those in need, government’s costs rise and taxes are raised. Those increased taxes hit the poorest the hardest, not the rich, who are also benefiting.
“This non-discriminating subsidy system by government also endangers the sustainability of this
The World Bank is among agencies that have urged government to review its subsidy schemes to ensure that those who can pay, do so.
Parliament recently resisted proposals to consider a wealth tax, which would have gone some way in ensuring that the country’s richest pay their share of the COVID-19 burden on the budget.
Selebi-Phikwe West legislator, Dithapelo Keorapetse had said it was important for authorities to consider introducing a wealth tax in the country.
“Consideration should be made to introduce wealth tax (which would be) a tax based on the market value of assets that are owned and these assets may include but not be limited to cash, bank deposits, shares, fixed assets, private cars, assessed value of real property, pension plans, money funds, owner-occupied housing and trusts,” he said in the last sitting of the National Assembly.
“Apart from addressing inequalities, wealth tax can increase government revenue, add to economic growth, encourage investment, for example, by coercing the productive use of assets and can have other positive social effects.
Meanwhile, BURS general manager ICE, Kaone Molapo confirmed that his department is overwhelmed by cases of tax evasion, but declined to provide details.
“Following our operation where we went after tax evading car dealers, we realised that we could be having a bigger problem,” he told Mmegi.“The businesses that you find temporarily closed have been found on the wrong and the taxman is in the process of regularising things with them.
“We have indeed found many Chinese and Indian businesses to be a major problem even though Batswana and other nationals were involved.
“They do undervalue goods and unfortunately we only realise upon investigating when they should have been caught at our borders.
“They give fake invoices and even though it is too much work, we are working hard to collect the taxes from them.”
Molapo also said the taxman is losing “billions of Pula” every year to tax evaders.
Other analysts have accused the BURS of being afraid of chasing up politically connected tax evaders or even asking them to open their books for assessment. The BURS appeared to hound members of the opposition parties in the run up to the last general elections, but has since then kept quiet on the cases.
In recent years, no ruling party member has been publicly exposed as being under investigation for tax evasion or tax affairs, leading critics to claim the BURS’ investigative ability is compromised by politics.
BURS customer education manager, Gofaone Baleseng defended the agency’s tactics.
“We have a matrix which categorises our clients,” he said.
“You will find that all the big people that you call politically exposed and those allegedly evading tax, are in our risk matrix and they are at the top.
“There’s a compliance strategy in place and we use that to give us guidance on who we follow, how and when.
“Tax is an annual thing and we may be following for a year or three to four years, then focus on others, then come back to you.
“It does not mean that if we part ways with you now, we are done forever.
“We may follow you in the next tax year.”
The BURS expects to collect at least P43 billion this year, up from P40 billion last year. Although the agency says this is due to the expected improvement in the economy, other analysts attribute the higher collections to the increases in tax rates.