Inside how Gov’t clamped down Tax avoiding constructors

06 Nov 2017

The Government’s strained relations with some construction and building companies have forced Botswana Unified Revenue Services (BURS) to effectively punish some companies by refusing to grant Tax clearance Certificate to companies which are failing to pay Income Tax Returns and Value Added Tax.

After a careful analysis of the companies Act, government through BURS started using Tax Clearance Certificate and targets some companies which are failing to pay Value Added Tax,(VAT) and Income Tax Returns while at the same time benefiting from government tenders. According to court records, Government uses money from consolidated funds to sponsor the same tenders in which some companies are avoiding to pay tax.

A typical scenario is a case in which the Court of Appeal dismissed an application made by Mabiza Plant Hire (Pty) Ltd for the matter to be heard by CoA and for BURS to grant them Tax Clearance Certificate.

Papers before CoA, shows that Mabiza Plant Hire (Pty) Ltd has failed to pay VAT, Income Tax Returns and some interest thereof which stood at 14 Million Pula from the year 2011 up to date.

Mabiza building company initially promised to pay 300 000 as monthly installment which was totaling to  (P1,300,00) and was archived only for a short period because the company had stopped paying after its Tax Clearance Certificate expired in 2012.

The company then made an application for renewal of the certificate but BURS refused.

On the 6th November 2012, Mabiza Building Company wrote a letter to BURS undertaking to clear the balance by end of November 2012 and to pay off the VAT which had accrued.

BURS responded a few days later welcoming the offer of payment and the assurance that VAT returns would be dully filed. According to the records before Court of Appeal shows that BURS pointed out that outstanding Income Tax liabilities including interest and penalties stood at more than 10 million (P10, 939,998-98) outstanding PAYE tax was (P103, 998-57) and outstanding VAT including subsequent accruals and interest stood at more than 3 million Pula (P3, 480,526-66).BURS undertook the decision to revisit the tax clearance certificate once tax arrears were cleared.

When appearing before the CoA, Mabiza attorney Gabriel Kanjabanga prayed for the court to be on their favour because his clients were broke because they are no longer benefiting from government tenders following the seizure of Tax Clearance Certificate.

While the lawyer BURS Kealeboga Tshane asked the court to dismiss Mabiza’s application with cost.

When delivering judgement, Ian Kirby dismissed Mabiza’s application saying the company has failed to provide evidence as to why they have failed to pay tax.

‘’It was not denied that Mabiza was a serial tax defaulter. It had not repaid the initial amount of VAT ordered in the consent order; it had not made Income Tax returns for several years and self assessment tax returns for all those years since 2011 and 2012 after its certificate expires up to date. Mabiza was liable as at November 2012 for arrear taxes of over 14 million Pula (P14, 000,000) and for subsequent taxes due. There was no how the commissioner General could possibly justify the issue to Mabiza of a renewed Tax Clearance Certificate, ‘’said Kirby

He said Kanjabanga had even failed to enlighten the court on whether the company is still placed under provisional liquidation.

He ordered that the application for the issue of Tax Clearance certificate to Mabiza Plant Hire be dismissed and all other respects of the appeal are dismissed with cost.

BURS were represented by Kealeboga Tshane while Mabiza Plant hire was represented by Gabriel Kanjabanga.