Tuesday, January 25, 2022

Green light for tax amnesty extension but…

Botswana economy is getting a stitch after another. The main aim is to put it together by collecting as much money from as many revenue sources as possible by the country’s Treasury Department. The tiny southern African nation has been reliant on diamonds to fund its national budget. The second and third option has been tourism and tax collections but all the three have been hard hit by the Covid 19 pandemic. But even before the arrival of Covid 19, which has been blamed for the retreat in the country’s economic activity, official GDP data shows that economic cogs were already grinding slowly, creating extra pressure on the nation’s ballooning budget deficits. On the other hand, the country’s Balance of Payments (BoP) – made up of the current, capital, and financial accounts – has deteriorated at the fastest pace in the last five years. The deterioration has been blamed on the underperformance of the diamond sector, which has been the anchor of the domestic economy since their discovery.

But now with the option to drawdown from the Government’s previously accumulated savings no longer available, the Treasury is looking on other possible revenue sources such as hikes in ministerial services, levies as well as efficiency in tax collection. Lately, the Botswana Unified Revenue Services – the government’s tax collecting agency has since modified its strategy which saw it introducing a tax amnesty earlier this year, first announced during the national budget speech by Finance Minister Peggy Serame in February.

This past week, Parliament was told that the Treasury Department has since ‘Okayed’ an extension of BURS’s tax amnesty period to June 2022.

The amnesty period, which began in June this year, was initially billed to end in December 2021 but a decision has since been made to push it into the first half of 2022, according to Serame.

Serame, who was briefing Parliament, said that the amnesty seeks to provide a one-time opportunity for taxpayers to settle their unpaid taxes.

 “The Scheme is thus part of the Ministry’s efforts to encourage taxpayers, with overwhelming and unmanageable tax arrears to clear their liabilities and start from a clean slate in terms of their tax obligations”, said Serame.

While the scheme seeks to grant delinquent taxpayers an opportunity to clear the total principal tax owed in exchange for write-off of interest and penalties charged during tax periods prior to 1st July 2021, the Finance ministry says only a few have so far taken advantage of it.

The Scheme targeted 22,839 taxpayers with Income Tax and VAT arrears amounting to approximately P6.8 billion. The arrears, Serame said, comprised of principal tax of P2.5 billion, interest of P3.5 billion and penalties of P800 million.

Serame further told Parliament that despite efforts by BURS, through different public and private media platforms, to encourage taxpayers to take advantage of the Scheme, “uptake of the Scheme has been very low”.

As at 30th November, 2021, out of a total of 22,839 taxpayers in arrears, 3,377 taxpayers, representing about 15% of the taxpayers in arrears, had applied for the Tax Amnesty Scheme.

To take advantage of the scheme, taxpayers are required to confirm their tax liability with the nearest tax office or use the BURS ICT platforms.

Once a conformation of liabilities has been made, taxpayers can then make payment for the principal tax and inform the Commissioner General of full payment of the principal amount by completing a form that is available on the BURS website.

Serame said that among the challenges faced by many taxpayers have been the continued problems due to the impact of COVID-19 pandemic on their businesses.

“The plea of representatives of taxpayers is based on the fact that a substantial number of their clients have the desire to take advantage of the Scheme but are constrained to pay their principal tax liabilities within the time remaining due to cash flow challenges occasioned by limited business as a result of the COVID-19 pandemic”, Serame said.

According to the Ministry of Finance, in terms of collection, a total principal tax of P64 million, comprising of Income Tax of P34 million and VAT of P30 million has since been paid. During this same period of amnesty, total written-off interests and penalties stood at P95.6 million, comprising of P65.4 million in respect of the Income Tax and P30.2 million in respect of VAT. The Treasury says overall tax debtors who have sought to take advantage of the Scheme only contributed an average of 2 percent of the outstanding debt.

As a result, Serame told Parliament that an extension of the BURS tax Scheme would create an opportunity for the taxman to engage with more taxpayers and update their taxpayer information.

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