Saturday, November 26, 2022

Single tax regime waits, industry happy

The Botswana Confederation of Commerce and Industry Manpower(BOCCIM) has welcomed the decision by Government after ceding their advise, to extend the period for implementation of the proposed single tax regime, which will replace the current two tier tax system, so that it takes effect next year July 1st 2011.

The Telegraph had enquired about the correspondence from the Ministry of Finance and development Planning (MFDP) to the effect that, implementation date for the amendment of the Income Tax Act was postponed to July 1 2011.

Permanent Secretary at MFDP, Solomon Sekwakwa, pointed out in a letter to BOCCIM that consultations with stakeholders took more time than was anticipated and this has delayed the process.
“The Amendment Bills are still being drafted and therefore the Ministry would not be in a position to present them to the National Assembly for approval during the current session of Parliament. They will be presented at a later session of Parliament,” read part of Sekwakwa’s letter.

Maria Machailo-Ellis, Executive Director of BOCCIM, told The Telegraph: “First of all it is important for BOCCIM that we have been able to save our members a lot of money by way of accumulated additional company tax.”

She mentioned that the significance of the postponement lay in that their role as an advocacy body and of lobbying for policy reform, on behalf of business is bearing dividends as Government now listens to them.

“Thus, it is a grand achievement to for our members,” the BOCCIM CEO said excitedly.
She pointed out that for some time now her organisation has been engaging Government on the issue of reforming the current income tax, and accordingly amendment of the affected laws as it was cumbersome.

To that end, a recommendation was made by the Botswana Advisory Council (BAC) to simplify the current tax system with a view to improving the investment climate and the competitiveness of the economy.

Kenneth Matambo, Minister of Finance and Development Planning was to later acknowledge at the beginning of this year upon delivering his budget speech that a review of the tax regime was completed and was a subject of extensive consultations with many stakeholders.

Matambo further anticipated presenting detailed proposals for the amendment of the Income Tax Act to parliament shortly afterwards.

Some of the relevant items he mentioned at the time included increasing the value added tax (VAT) threshold from 250 000 to 500 000, and the escalation of the VAT rate to 12 percent from the initial 10 percent, all of which effected April I 2010.

However, the most pertinent reform desired related to the change in the current two tier system which will now be replaced by a flat corporate tax rate of 25 percent (15 percent for manufacturing & International Finance Services Company (IFSC) companies).

Presently, the two tier tax system entails Company tax and what is known as Additional Company tax (ACT).

Butler Phirie, Senior Partner at PriceWaterhouse Coopers concurred with the BOCCIM Chief.
“The effect of the transitional period is that companies having a taxable income for the 2011 tax year will generate ACT of 10 percent which can be utilised to set off the withholding tax of 15 percent on dividends declared (relating to such profits) before 30 June 2011.”

In addition, Phirie intimated that since companies have peculiar circumstances, they can now use the opportunity to consult their tax experts and consultants to clear up in time.

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