Friday, December 4, 2020

Govt to allow foreigners to repatriate profits

The Botswana government does not believe the time has come to review the policy of allowing investors to repatriate their profits, taking into account two-pronged considerations.

“First, profits of foreign investors are already subject to standard rates of corporate income tax at the prevailing rate of 22 percent. Dividends are also subject to withholding tax of 7.5 percent,” noted Assistant Minister of Finance and Development Planning, Vincent Seretse.

He added that, secondly, in this way, Botswana is able to get its fair share from any foreign investment proceeds. He said that the introduction of such a policy would, therefore, be in defiance of standard international norms.

Worse still, consistent with IMF Article VIII obligations, the country would require the explicit approval of the International Monetary Fund to do so.

“Further, such policy action would run counter to and undermine efforts to attract foreign investment in Botswana, including Economic Diversification Drive,” Seretse said, arguing “in this regard a policy designed to bar repatriation of profits would not yield more dividends to the country.

“An impression should not be created that foreign-owned entities operating in Botswana do not already re-invest significant amounts in the economy. This is because Botswana’s detailed balance of payments estimates prepared by Bank of Botswana during the period 2008-2012 shows that retained earnings totaled P7.6 billion,” Seretse further revealed.

This profit of foreign-owned businesses that were not repatriated account for eighty percent of recorded inflows of foreign direct investment over the same period.

Investors move their securities out of a particular country because of a fear of country specific risks or political stability or because of the lure of higher returns in a different country, Seretse told parliament.

He quashed notions that foreign investors are a “capital flight”.

“It should be apparent from this definition and from what I have already explained that the very control proposed by the MP are far from curbing capital flight but rather would likely encourage it instead,” Seretse further noted.

BDP legislator Fidelis Molao had posed the parliamentary question on Monday.

Seretse did not agree to a recommendation of a ceiling for foreign investors as suggested by another BDP Member of Parliament, Botsalo Ntuane, arguing that not until the implementation of CEE would the move be attainable.

Ntuane said that foreign investors make millions of Pula from government tenders and that money would sooner or later be repatriated.

He called for the government to set a ceiling of profits for these investors, exceeding which they would be prompted to part with a certain amount.

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