Government has forced Botswana Unified Revenue Services (BURS) to write off a P 600 000 000 ( six hundred million) Value Added┬á Tax (vat) debt owed by the Chinese Company that was commissioned to build the botched P 11 billion┬á Morupule B project.
Sunday Standard investigations have turned up information that just before the 2014┬á general elections, Cabinet met and took a decision to direct BURS┬á to issue an exemption certificate absolving China National Electric Equipment Corporation (CNEEC) from paying the VAT it owed. BURS had obtained a garnishee order allowing them to impound the CNEEC payment from the Botswana Power Corporation (BPC).┬á Curiously, BPC violated the court order and paid the Chinese company the money.
CNEEC had initially approached government for a tax exemption. When their proposal was turned down, they then turned to the BPC to masquerade as the importer of construction material from China, thus offloading liability for VAT on the Botswana parastatal. Although the Chinese company was claiming its VAT refunds from BURS, it has not been paying its share of VAT, which has accumulated to a staggering P600 million. It has emerged that invoices for the project were generated in China and payments are also made in China where the financing bank is based, and invoices were only presented to the BPC for purposes of issuing certificate to facilitate payments ÔÇô cutting out BURS.
Contacted for comments last year, BURS spokesperson, Refilwe Mogami, told Sunday Standard that “the garnishee order that has been issued only concerns the BURS and the said client” and cannot be discussed with a third party. Responding to a Sunday Standard questionnaire at the time, BPC spokesperson, Spencer Moreri stated that, “the Corporation is not in a position to divulge any information to third parties as per the contractual obligations of the contract in regard to communication”.
There are suspicions that the P600 000 000 tax exemption may be a political decision following whispers that a number of companies subcontracted by the Chinese companies belonged to influential people some with links to cabinet. Sunday Standard can reveal that at some stage, BURS demanded a list of all companies subcontracted in the controversial project, but the Chinese company would not disclose the names of the companies it had sub-contracted. Contacted for comments this week, the Minister of Minister of Minerals Energy and Water Resources (MMEWR) Kitso Mokaila said he did not want to be drawn into discussing false allegations.
The Umbrella for Democratic Change (UDC) is expected to file a question in the next parliament querying the decision to exempt the Chinese company from paying the VAT.
BURS spokesperson Matshidiso Pule on the other hand said, “In terms of the Income Tax and VAT statutes, BURS is not allowed to disclose to any person or that person’s representative, any matter in respect of their tax affairs save for the Institutions envisaged under the said laws.”
An analyst close to BPC issues pointed out that beside the failure of the Morupule B, the corporation is faced with losses from a badly structured “financial instruments” at a time when they borrowed money from China. They borrowed in United States dollars which is fast appreciating in value against the Pula,” an analyst said. “In the next 10-to- 20 years, its financial problems are expected to be worse than now if you were to take the pula devaluation into consideration. If you look closely at the problem, it is not necessarily that they are buying power at high price, rather it is because of the loan.”┬á The total cost of the project is P 11 billion, about P 6 billion or (US $ 850 million) is from China and the rest from government and the World Bank.