One would expect the Botswana Unified Revenue Services (BURS) Commissioner General, Jeanette Makgolo and her executive team to be having sleepless nights, given the pressure on the state to ratchet up tax financed welfare spending to support the ailing economy. But at a press conference held this week, Makgolo and her team cut a sanguine figure as they addressed journalists at the Protea Hotel on the BURS operations in the past few months including a confirmation of the recent provisional suspension of senior executives.
Precautionary suspensions aside, the taxwoman and her team were calm and forthright. They possibly have compelling reasons for why they maintain a positive outlook on the health of Botswana’s tax system. First, the BURS team shared that it continues to meet tax collection targets. However, based on the collections data they shared with journalists on Thursday, and in comparison with economic indicators data shared by other state agencies such as Statistics Botswana, the recent satisfactory tax collections are not due to a growing economy that is creating thousands of jobs but comes from an obvious source – the mining sector. Botswana’s mining sector has been on an upward trajectory over the past several months thanks largely to resurgence in demand for diamonds and other minerals like coal and copper.
Bakwena Tutu, Commissioner – Operations at BURS says the mining sector recovery has resulted in more revenue coming in hence the state owned tax collecting agency being able to meet its target. As at the end of September 2022 BURS’s revenue collection for the financial year 2022/2023 stood at P23.851 billion, surpassing a target of P23.217 billion for the period by P634 million or 2.7 percent.
In comparison to the corresponding period of the previous year 2021/2022, the current overall revenue collections represent an increase of P6.571 billion or 38.1 percent.
Makgolo said that the good performance is not a windfall but rather a product of hard work and commitment in addressing performance gaps as well as responding to the current business challenges by the BURS.
Electronic Billing system on the way…
As part of the responses, and in a bid to enhance VAT compliance, BURS is preparing to get local enterprises to install Electronic Billing systems which will give the taxman real-time access to invoices.
“By the time the businesses come at our office to submit returns, we would be in possession of the information of how much is due from them in terms of VAT”, says Mokgolo.
Makgolo said that to improve the efficiency collection of VAT, BURS is in the process of introducing the electronic billing solution which is expected to minimise what the taxman calls the ‘VAT fraud’.
According to Makgolo, BURS has completed the benchmarking process in eastern African countries – Rwanda and Tanzania and has since kick started the procurement process to engage a project manager for the implementation of the solution.
VAT, which is borne by consumers of goods and services at every stage of the supply chain when value is added, accounts for the third largest portion of the revenue collections that BURS has been making. In the period under review, VAT collections amounted to P4.8 billion as compared to P12.03 billion and P7 billion collected via Personal Income Tax and Customs Receipts respectively.
By leveraging on electronic billing system, BURS is hoping to crack down on negligent taxpayers and increase the portion of VAT in the revenue pool. BURS officials have repeatedly stated that one of the lowest hanging fruits in Botswana is the revenue that the state could get from increasing tax compliance. But now with an improved ICT system, BURS says confidence on the tax authority is now on the rise.
“Let me confirm to you that the performance of our ICT systems has significantly improved, and our customers have shared testimony to that”, said Makgolo.
Warning lights are flashing…
While Makgolo and the BURS executives are happy about a double victory of rising confidence and target reaching, that still does not answer the question that lingers on many people’s minds – whether Botswana’s tax base will grow fast enough to ensure that that the country’s long term fiscal sustainability without the government having to resort to new tax or tax hikes. When it comes to spending, the big ticket items for the government have been the public sector wage bill as well defence. According to the Budget Strategy Paper for 2023 for the financial year 2022/23, government’s total Revenues and Grants are forecast to reach P71.6 billion, while Total Expenditure is expected to register P79.2 billion, yielding a budget deficit of P7.7 billion, or -3.4 percent of GDP. The deficit reflects the increase in salaries of public officers during the current financial year as well as next year. While the government has since started a rationalisation exercise which could see a slight trim on the public servants wage bill, a final political decision at cabinet level are yet to be made on how many jobs will go. This means that there wage bill could be the biggest beneficiary of the tax collected. In the meantime, there is however a talk of retrenchments at some state owned agencies which are part of the rationalisation exercise. As for BURS, Makgolo told journalists that the agency has started working on realigning its organisational resources to ensure an adequate allocation of human resource. The process includes engaging a service provider who will advise the BURS on the headcount as well as skill base.
“The tender for the procurement of a service provider was closed on Friday 14th October 2022 and is undergoing evaluation. The expectation is to have the realigned organisational structure operational before the end of 2023”, said Makgolo.