Botswana has been listed by the OECD as one of 20 countries with tax laws regarded as harmful preferential regimes, which facilitate tax avoidance by multinationals and reduce the tax base of other countries.
While Botswana falls under the categories of countries with “harmful tax practices”, unlike others on the list, OECD accepts that its tax regime is “in the process of being amended.”
The review, conducted by the OECD Forum on Harmful Tax Practices (FHTP), assessed countries’ tax laws against internationally-agreed standards set in Action 5 of the 2015 OECD/G20 base erosion profit shifting (BEPS) plan agreements. Altogether, 164 tax regimes were reviewed. Both the report and the BEPS standards have been endorsed by the “BEPS inclusive framework,” a coalition of over 100 countries.
Botswana and the following nations have one or more harmful preferential tax regimes contrary to BEPS Action 5 standards: Spain, Switzerland, Andorra, Barbados, Belize, Costa Rica, Curaçao, France, Hong Kong (China), Macau (China), Italy, Mauritius, Malaysia, Panama, San Marino, Seychelles, Thailand, Trinidad and Tobago, and Uruguay.
The report, titled, “Harmful Tax Practices ÔÇô 2017 Progress Report on Preferential Regimes,” was based on a review of 164 tax regimes against standards set as part of the 2015 OECD/G20 base erosion profit shifting (BEPS) plan agreements. The aim of these standards is to “counter harmful tax practices more effectively, taking into account transparency and substance”, and cover tax incentives that apply to mobile business income. According to the report, the government of each country has pledged to cure the non-compliance, except for the governments of France and Italy.
All listed countries, except for Trinidad and Tobago, are BEPS Inclusive Framework members, and thus have generally agreed to adjust their tax regimes to meet the harmful tax practices standards no later than October 2018. The OECD will continue to monitor and review the implementation of countries’ commitments to eliminate or amend regimes to ensure consistency with the Action 5 standard, the report said.
Most countries on the FHTP list have several different tax regimes that fail the OECD standards. For example, Barbados is listed as having 9 different preferential tax regimes. The FHTP report also said that during the two-year review period, the following seven countries abolished tax regimes identified as harmful: Colombia, Luxembourg, Liechtenstein, Malta, San Marino, Singapore, and Malaysia.
In June this year, Botswana joined the OECD’s base erosion and profit shifting (BEPS) Inclusive Framework. This means that as a member of the Inclusive Framework, Botswana will work on an equal footing with other members and G-20 and OECD countries in the development of further anti-BEPS measures and the peer review process. Botswana will implement and support the review of the four BEPS minimum standards, on harmful tax practices, tackling tax treaty abuse, country-by-country reporting, and improvements to cross-border tax dispute resolution mechanisms. A total of 99 countries have now joined the Inclusive Framework.
