A new tax that may strip purchasing power from the elbow benders, and hand it straight to the taxman is in the offing. While the Botswana Unified Revenue Services (BURS) said this week that it is forging ahead with its ‘track and trace’ system, which is designed to crack down on tax losses in the manufacturing sector, the alcohol industry which is a key player in the manufacturing sector has expressed dissatisfaction about it.
The Botswana Alcohol Industry Association (BAIA) says it has expressed its concerns that the solution being implemented by BURS will not achieve its stated aims.
“The solution punishes legitimate business, and significantly increases prices for consumers in a difficult inflationary environment while not addressing the issue of enforcement,” BAIA told Sunday Standard on Friday.
A day before that, BURS Commissioner General Jeanette Makgolo told journalists at a press conference held in Gaborone that the introduction of this solution was prompted by an influx of smuggling of excisable products which was exacerbated by high duties and levies on some products.
Makgolo said there has been a rife counterfeiting practice in the market with the taxman unable to establish whether the products are being smuggled or being manufactured within the country.
She admitted that in the self-regulating industry, BURS has not been able to perfectly verify compliance and payment of collectable duties.
“There has also been industry complaints that other players in the market are underpricing the products hence possibilities of smuggling,” Makgolo said.
As a result, Makgolo said that once fully implemented, the track and trace system will be transformational for Botswana and help support excise revenue collections.
“It is expected to ensure that legitimate duties and taxes are paid on all of these imported and manufactured products and provide a fair and level playing field for all compliant manufacturers, importers, and traders while protecting consumers from often harmful and substandard illicit and smuggled goods.”
There is always an alternative – BAIA
While Makgolo maintains that the new system will strengthen fair market conditions for compliant players and improve administration of the of the excisable goods industry, BAIA on the other hand insists that there are alternative solutions to address the concerns raised by the taxman, “which do not unreasonably burden the industry and consumer”.
BAIA does not rule out the possibility of a price hike once the new system is put in place.
“A new tax will always have an impact on the cost of product. And by implementing the 15 Thebe tax stamp, BURS is essentially introducing a new tax. Over and above introducing a new tax, based on case studies of tax stamps implementation in other African beer and alcohol markets, we anticipate extensive disruptions to the industry, which will drive up cost of production, and the cost will inevitably impact the end-consumer. The unintended consequences of this new tax will be far-reaching.”, said BAIA.
The association said that while it is not opposed to the track and trace system, in principle, it questions if it is suited to the problems that have been presented by BURS.
“BURS has cited, amongst other things, smuggling, tax evasion and the need to improve tax revenue collection, as reasons to implement the system. However, the agency has not provided any quantitative data nor conducted an impact assessment to one – determine the veracity of the issues, and two – explore other more suitable and less drastic solutions to address them”.
Despite the resistance to the new system, BAIA says it is committed to be part of the solution and support Government in creating a conducive trade environment.
“We reasonably expect that standards for good regulatory practice are observed. This means having the BURS and Government address our well-founded concerns in earnest”.
While Makgolo told journalists that BURS has done thorough engagements from as far as 2016 with the industry and carried out benchmarking exercises prior to introduction of the solution, BAIA says it has lost an opportunity to explore alternate solutions and solution providers following the appointment of Authentix (Pty) Ltd by the BURS as a service provider.
“We wish to put it on record that since the commencement of engagements with the industry in 2016, BURS has never invited the alcohol industry to provide an alternative solution, despite a commitment and willingness by the industry back then.”, said BAIA.
