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Tax collection Plummets as Trade agreements hit Botswana

Tax collection Plummets as Trade agreements hit Botswana
WORRIED: Lekau

Botswana Unified Revenue Services (BURS) Acting Commissioner General, Segolo Lekau says the country’s various trade agreements have affected Botswana’s tax collection.

In February last year, Botswana signed the African Continental Free Trade Agreement (ACFTA).

While this allowed the country to benefit from inter-regional trade within the continent, Lekau explained it also means trade taxes – tariffs collected on imports – with other African nations were no more.

“This means when we consume within the continent, there are no taxes. As you may be aware, when we consume from the likes of the European Union (EU), as we are also sending our beef there, duty rates have been decreased,” said Lekau.

Lekau was appearing before the Committee on Statutory Bodies and State Enterprises on Monday, where he stressed that entering into these agreements has hit Botswana’s tax collection hard.

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He explained this has called for a change in strategy, with the country having to look inwards and mobilize revenue from domestic sources.

“We have to work hard to ensure that we get more money from domestic sources,” reiterated the acting CG.

Lekau revealed the highest revenue BURS has ever collected was P40 billion in the 2017/2018 financial year.

The following year proved almost as fruitful, with the tax collector raking in P38 billion.

“Revenue collection is a reflection of how the economy is performing. So when the economy experiences difficulties such as declining diamond sales, then revenue collection drops,” Lekau told the Committee.

He further disclosed that the Southern African Customs Union (SACU) receipts have also gone down.

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When BURS collected P40 billion, Lekau said P17 billion was from SACU receipts, an amount that dropped to P14 billion in 2018/19.

According to Lekau, the tax legislation is continuously being reviewed, which he maintained was in fact good practice as the tax law is supposed to be dynamic and not static.

“This is because as you introduce something new, there is always a response from the taxpaying community. They also have their schemes to counter you.”

Lekau revealed the most significant thing BURS did this year was to amend the Income Tax Act to include Transfer Pricing.

“This is because we ought to deal with the multinationals to deal with the issue of Base Erosion and Profit Shifting (BEPS) because under the Organisation for Economic Co-operation and Development (OECD) programme, that has been identified as a gap in developing countries,” said the BURS Acting Commissioner-General.

He explained it was found that developing countries are not taxing multinationals enough, with many such companies paying tax in their country of origin and not where they operate from.

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