Wednesday, May 25, 2022

Amendment of VAT law could hurt businesses ÔÇô Expert

The government should implement a cautious approach on its proposed changes in the law governing the Value Added Tax, an expert on issues of tax, who is also a partner at Grant Thornton, Vijay Kalyanaraman, said this week.

Speaking to Sunday Standard in a brief interview on Friday, Kalyanaraman said moving some commodities from the list of zero rated to ‘exempt list’ as proposed by the government would hurt some businesses as they would no longer be entitled to claim the commodity expenditure from the Botswana Unified Revenue Services.

According to Kalyanaraman, ‘zero rating’ make supplies cheaper as dealers in these goods and services can claim input tax incurred in the course of their business.

Currently zero-rated foodstuffs include sorghum, maize meal for human consumption, millet grain, millet meal, wheat grain, maize cobs, flour, sugar and Setswana beans.

Exempt supplies also include supply of services by a person in the ordinary course of operating a public medical facility, supply of prescription drugs, supply of education services, and supply of domestic passenger transportation by road or rail and supply of condoms.

When making the 2014/15 government budget proposals at the beginning of this month, Finance and Development Planning minister, Kenneth Matambo, said the government plans to amend the law governing the Value Added Tax (VAT) as well as the Income Tax Act.

“During the financial year 2014/15, my Ministry will present to Parliament amendments to the Income Tax Act and the Value Added Tax (VAT) Act. Specifically, the VAT Act will be amended to exempt all farming equipment and all basic food staff which are currently zero rated.”

Matambo said the move to amend the VAT Act is meant to encourage intake of balanced meals for families. The minister said the list of basic food items will be increased to include, among others, vegetables, rice and milk.

In addition to the proposed change, Matambo said that the VAT registration threshold will be increased from P500 000 to P1 000 000 in order to relieve small tax payers on the burden of regularly filing VAT returns.

“These amendments are geared towards simplification of the tax laws and tax administration and to encourage compliance. We will also present to Parliament, amendments to the Transfer Duty Act, which are meant to encourage homeownership, especially by first-time home owners,” Matambo said.

The government abolished the Sales Tax in 2000 and as a result established the Value Added Tax at a rate of 10 percent which was increased to 12 percent in 2010. The introduction of this tax was necessitated by the need to diversify and increase the Government revenue base.

Meanwhile the Transfer Duty Act, which is meant to encourage homeownership, especially by first-time home owners, is also expected to be amended, according to Matambo.

Currently prospective home owners are subjected to the Transfer Duty which is payable and paid upon the purchase price or value of any immovable property, whether freehold or held from Government upon quitrent or other leasehold tenure, sold or otherwise alienated or transferred.

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