While the government has gone all out in a bid to increase tax collection by adjusting various taxes, sources suggest that it was not necessary, but rather there was need to reinforce systems and processes of the Botswana Unified Revenue Services (BURS).
It is said that a lot of foreign nationals owned businesses have used these gaps to master the art of tax evasion, sending out millions of Pula from 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 as BURS through Investigations, Compliance and Enforcement (ICE) Unit has since pounced on many businesses who failed to declare rightfully. These are mostly foreigners-owned operations. They have mastered the whole system and are declaring only a small amount of what they are due to pay as they ‘fake’ invoices,” a source said.
Mmegi has observed some closed some foreigners-owned businesses including tyre dealerships which are alleged to have tried to trick the taxman. As if under-pricing was not enough, some even supply government with excessively over-priced counterfeit tyres. The source said the situation is so bad that the country could be collecting billions of Pula in taxes and there would not be any need to increase taxes making Batswana suffer while foreigners continue trading tax freely.
“The government instead of increasing taxes should have focused on improving BURS systems. There is also a need to increase staff compliment in the ICE division as 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 their 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 while Batswana sink deeper into poverty,” the concerned source lamented.
Even though he did not want to get into details, BURS general manager ICE, Kaone Molapo said indeed his department was overwhelmed by cases of tax evasion. “Following our operation where we went after tax evading car dealers; we realised that we could be having a bigger problem.
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 foreigners-owned businesses to be a major problem even though Batswana and others 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,” he said.
Molapo also said they lose billions of Pula every year to tax evaders, he however would not comment on whether the increase in taxes was necessary. He said they would continue going after tax evaders.
The then Minister of Finance & Economic Development, Dr Thapelo Matsheka announced a number of tax changes whilst presenting the national budget in February. These tax changes come against the backdrop of constrained government mineral revenues as well as a dip in SACU and domestic tax collections which were mainly occasioned by COVID-19. While the BURS collected P40 billion last year, this year it is expected to collect in excess of P43 billion due to the taxes. This has angered experts in the tax field as they believe it will only make Batswana poorer while tax evaders will also have more money to make.
Value Added Tax (VAT) rate was increased from the rate of 12% to 14%, effective April 1, 2021. The VAT rate increase is expected to increase BURS tax collection by around P1.27 billion per annum.
For the first time in 10 years, the Minister offered a tax amnesty to taxpayers where tax interest and penalties will be waived upon payment of the principal tax. This is intended to ensure that taxpayers burdened with heavy tax penalty and interest charges are relieved of their onerous obligations.
The Minister announced increase of the exemption threshold from the current P36,000/annum to P48,000/annum, which will give a slight tax relief to all individuals as their tax will go down to the extent of the P12,000 increase. Those earning not more than P4,000/month will not pay tax at all.
The sugar tax has been introduced at the rate of two thebe per gramme in excess of 4g/100ml. This is one of the sin taxes, which is meant to curb the consumption of such beverages.
The rate of withholding tax on dividends is currently pegged at 7.5 percent of the gross dividends. The Minister proposed to increase the rate from 7.5 percent to 10%, effective July 1, 2021. Shareholders will, as a result, pay more tax on dividends and this is expected to boost BURS tax collections.
A law will be put in place to enhance collection of the plastic levy by BURS, anytime now. For years now plastic levy has been collected without proper legislation.
The fuel levy has been increased from the current rate of 12 thebe to P1.12, which represents a huge spike. The Minister stated that this increase was made to cater for the fact that the rate was never changed since the inception of VAT in 2002.
The Minister also proposed to introduce a levy on second-hand vehicles imported into Botswana as a way of raising revenue and curtail pollution. No further details were provided regarding the magnitude and date of implementation of the levy.