Where does the lack of employment opportunities leave tax collection? It is in the best interest of Botswana Unified Revenue Service (BURS) to find ways of widening sources of tax, failure of which will undesirably increase the burden of tax on existing tax payers.
The ugly truth is that if BURS does not find innovative ways of ensuring that as many people pay their fair share of tax as possible, government will be compelled to hike the tax rate. Therefore the winning formula would be to generate tax revenue from as many people as it permissible by law.
There is no doubt that BURS’s efforts to spread the tax net further will be impeded by the deprivation of jobs in the economy. Speaking at the Commonwealth Association of Tax Administrators (CATA) conference in November last year, BURS’ Chief Executive Officer Ken Morris said: “We have taxed various sectors and in some cases we really don’t have much to tax.” His statement points to the difficulty that BURS is subjected to in its efforts to widen the tax base. The lack of jobs, which could provide an important source of tax for government, therefore does not help Morris and BURS’ situation. Because taxation in Botswana is collected at the source, government will not be able to collect and accrue revenue if the source is crippled.
Every individual who earns an income is subject to income tax either from an actual or a deemed source. Examples of sources include the employment income, business income and income from immovable property. Self employed persons are obliged to submit a return of income on an annual basis before the tax year ends, which is no later than September. Tax is therefore imposed on income received through a service that is provided or for work that is done, which makes tax revenue for government a requirement. In that regard, tax revenue is in used to benefit the public through provision of public services and works. BURS has an insurmountable task of guaranteeing and ensuring the sustainability of tax revenue collection, as failure to do so will compromise government and starve it of sufficient funds to spend on public services.
Income tax is a significant non-mineral source of revenue to the economy, its collection is therefore necessary for the government to continue to benefit the public.
It appears BURS is already facing problems in accruing non mineral tax revenue as indicated by Bank of Botswana annual reports, which show a positive growth between the years 2011 and 2013. Non-mineral revenue was recorded at P22 663 million, P29 582 million and P30 508 million in 2011/12; 2012/13 and 2013/14 respectively.
BURS annual reports between the years 2011/12 and 2012/13 show an upward trend of tax revenue collection. The 2012 annual report recorded a growth of 21.5 percent of tax collected in 2011/12 at P20.06 billion from P22.93 billion in 2010/11. The report highlights that collection exceeded target by 6.3 percent, which had been set at P22.93 billion. The surpassed target was due to the increase in income tax collection and SACU revenue receipts which exceeded targets by 21.8 percent and 0.4 percent respectively. Conversely, the 2013 annual report reflects a shortfall of 1 percent of actual collection against the set target which was attributed to the low performance of the income tax. Income tax plunged by 10.4 percent below its target. Tax revenue collection on the other hand increased by 22.6 percent from P24.37 billion in 2011/12 to P29.87 in 2012/13.
While the figures reflect a defiant revenue collection by BURS, the threat of a narrow tax base hovers on the tax organization. The population characteristics, in particular send off a warning in the sense that the age distribution of the 2006 Botswana demographic survey shows that 35.4 percent of the population is below 15 years while 59.5 percent is aged between 15 – 64 years and only 5.2 percent above the age of 64. What this means is those persons between the ages 15 and 64 represent an immense revenue potential for BURS. Sadly, the same persons are direfully starved of job opportunities. This is a huge but idle potential that because of unemployment poses a real threat to Botswana’s tax revenue collection.