While in the global space legislators are acting to close e-commerce VAT and sales tax loopholes, their counterparts in Botswana are still battling it with physical vendors and businesses which are not tax compliant. The battle is not with online businesses but rather the traditional businesses which one way or another escape the eye of the supposedly watchful taxman.
This past week, Minister responsible for Finance and Economic development – Dr Thapelo Matsheka said there is need to amend the law to compel for pay points to be installed across all businesses which will help in closing the loopholes that exist in tax compliance.
Dr Matsheka who admitted before Parliament that there are indeed some loopholes that exist, said one of the key projects that are being undertaken by the Botswana Unified revenue service (BURS) currently is to try and automate tax payments systems.
He told Parliament that, “As one would imagine the law currently does not prescribe that the tax payments be done online and therefore, the level of compliance is not such that it is satisfying.”
Selibe Phikwe West Legislator Dithapelo Keorapetse had major concerns on the loopholes for tax evasion which lies in some of the business people not having traceable pay points whilst they are paid large amounts of money in hard cash.
Keorapetse sought to establish if the Minister is taking any action on the business community, in particular, the Indian and Chinese origins who do not have pay points at their businesses and are paid with large amounts of cash making it difficult to audit and actually check compliance.
“What is it that the Government, especially your ministry, is doing to ensure that these people pay tax?” asked the Phikwe West legislator.
Giving his response, Dr Matsheka emphasized that BURS is working around the clock to enhance compliance and part of that requires regular audits for all taxpayers that are registered with BURS. This also entails visits to all businesses that have been licensed to operate in this market to ensure that they are indeed compliant, “as you would know that most of them would actually have a Tax Identification Number (TIN).”
Keorapetse had further probed the Finance Minister to unpack the country’s tax ratio to GDP and his plans to improve it.
Botswana’s tax to Gross Domestic Product ratio is still below the benchmark for emerging market economies such as South Africa, whose ratio currently sits at 26 per cent compared to Botswana’s 22.3percent for the 2017/18 financial year.
Based on the latest audited revenue figures for the 2017/18 financial year, Botswana’s ratio is 22.3 per cent. This is the proportion of tax revenue in relation to the country’s GDP for the stated period which comprises of Income Tax, Value Added Tax (VAT) and Customs and Excise receipts.
According to Dr Matsheka Botswana’s tax to GDP ratio of 22.3 per cent for 2017/18 financial year compares favourably with the Southern African Development Committee (SADC)’s average tax to GDP ratio of around 17 per cent for 2017/18 and average of 17.2 per cent for Africa. This he said is still below the benchmark compared to the country’s regional peers.
In order to be comparable with her peers, Dr Matsheka said the Botswana Unified Revenue Service (BURS) has a new Strategic Plan 2019 to 2024 and within the Plan, one of the Key Performance Indicators requires an improvement in the tax to GDP ratio to reach 26 per cent by March 2024.
“Some of targeted strategic initiatives to attain that goal include (a) Undertaking a project to estimate the Tax Gap to provide insights regarding the economic sectors in which to focus BURS’ revenue mobilisation efforts; and (b) Enhancing enforcement efforts by increasing the number of tax audits conducted on taxpayers,” he told Parliament.
