Thursday, October 28, 2021

Tax avoidance rampant in Tourism sector ÔÇô academic

The country’s tourism industry is said to be failing to generate sufficient amounts of money through taxation due to some tourism companies’ failure to pay tax.

The tax avoidance is also associated with the fact that most bookings and payments for tourists who visit Botswana’s wildlife areas are done outside Botswana. Most bookings are reportedly made in countries where the safari companies’ head offices are located such as South Africa, North America, Europe or Australia.

Contained in the report title Poverty or riches: who benefits from the booming tourism industry in Botswana, published by University of Botswana Professor of Tourism Studies at the Okavango Research Institute, Prof Joseph Mbaiwa found out that in assessing tourism’s economic impact in Botswana, it was concluded that the one area where tourism does not appear to be making a substantial contribution to government revenue is taxation.

According to the findings, of the 70 tourism companies listed in the 1999 edition of the Hotel and Tourism Association of Botswana (HATAB) Trade Directory, tax returns could only be found for 23, and of these, 15 had financial statements which were unaudited, being instead prepared from records, vouchers and information supplied to the accountants by the company directors.  Also indicated is that as a result, only 8 of the 23 companies were liable for company taxes on the basis of their most recent financial accounts. Prof Mbaiwa stated these results indicate that only 11 percent of the tourism companies in Botswana pay tax. He added that of this revenue, two companies accounted for 86 percent of it.

“It is difficult for the government of Botswana to obtain the necessary tax revenue ÔÇô when financial books are kept and audited outside the country. This indicates that businesses that have offshore earnings are more difficult to tax than businesses that receive most of their earnings from domestic sources,” said the report.

Prof Mbaiwa further stated the findings that although the tourism industry in Botswana is making a valuable contribution to Botswana’s economy through employment creation and payment of licenses and other fees, it is failing through taxation. He added that the failure of tourism to contribute to the domestic economy is a challenge many other developing countries face as well.

He also observed that it in the Caribbean, for example, foreign companies and investors are noted for dominating the tourism industry state that ‘investment incentives to foreign firms represent an effective transfer of tax revenue from the domestic economy to the foreign home of the firms in question’.

“The lack of proper taxation of foreign based tourism companies in developing countries such as Botswana contradicts the ideals of sustainable tourism. This scenario shows that resources in developing countries such as Botswana are sometimes used to promote the economies of more developed countries,” reads the report.

RELATED STORIES

Read this week's paper