Friday, December 4, 2020

Botswana under pressure to “delete” Tax haven tag

The Botswana government is said to be working under pressure to end what it calls “perception” of it being classified as a tax haven by the international community.

In a bid to crack down on international tax havens, in December 2017 EU finance ministers in Brussels endorsed a blacklist of 17 non-cooperative jurisdictions which excluded Botswana. The EU believe’s these territories are colluding in tax avoidance and have refused to commit to tax transparency and information exchanges with national authorities.

However Botswana was added amongst the countries which the EU says had failed tax transparency standards but made sufficient commitments to change its ways.

This past week, Finance and Economic Development Minister Kenneth Matambo said that in an effort to comply with international standards, “Government is undertaking a review of the Botswana International Financial Services Centre tax regime in order to remove any perception that Botswana is a tax haven”.

Matambo was making his 2018/19 budget speech in Parliament in which he also confirmed an amendment of the Income Tax Act. The amendment Bill is said to be scheduled for presentation to Parliament during 2018.

On Friday, Grant Thornton Partner (Outsourcing and Taxation) Rajesh Narasimhan told Sunday Standard that it is necessary for Botswana to introduce transfer pricing regulations as that would help the country to quickly get rid of the ‘tax haven’ label.

Botswana has been classified as tax haven by some countries since 2012, a craze that government officials have always denied.

Narasimhan said that given the multi nationals that operate in the country it is important to carefully choose which the kind of policy that will suit Botswana environment.

“There is need to carefully study which policy to adopt given the fact that Botswana has international mining companies and at the same time have some of the companies that are incorporated here expanding into the region”, Narasimhan.

Narasimhan, who is in charge of taxation services at Grant Thornton Botswana, says the introduction of the transfer pricing regulation is long overdue and recommended that Botswana could look either down south its neighbour South Africa which has had the policy for over 10 years or up north in Zimbabwe whose policy caterers for both domestic and international companies.

Meanwhile Narasimhan is of the view that the cost of doing business for local companies will not necessarily escalate as a result of the imminent regulations.

“It will be like a normal expenditure for companies or their subsidiaries”.

Narasimhan has been dealing with taxation and tax consultancy for a multi sectoral client based in Botswana.  

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