Monday, June 1, 2020

The Tax man speaks on compliance, high income country…

With 17 years left before 2036 – the year, in which Botswana aspires to become a high income country, economic pundits are already questioning whether the country is trapped in the middle income bracket.  Economic indicators and data show that the country’s transition to becoming a prosperous and modern economy has only just begun. Having been declared by the World Bank as an upper-middle income country in 2005, the country seems to be stuck, atleast for now in that bracket.

Globally, the notion of a middle-income trap has generated much interest and discussion, but little consensus. There is no agreement on what the trap is or how long a country needs to be at the middle-income stage to be considered trapped.

The global debate centres on a well-known stylized fact. Many countries, including Botswana made the jump from low income to middle income, but only a handful were able to make the final jump from middle income to high income. Economists suggest that a number of structural factors, such as the shift from input-led growth to productivity- and innovation-led growth, make the middle-to-high transition more challenging. 

For Botswana, some economic pundits are of the view that with the right mix of policies and laws, the country can still can change its fortunes by 2036 and earn a few more tiger stripes.

The country’s central bank says in order to move to the next economic stage Botswana need a through introspection of its Development Financial Institutions otherwise known as DFIs. 

For the tax man, Botswana United Revenue Service (BURS)’s Acting Commissioner General – Segolo Lekau the country’s aspirations to transform from an Upper Middle Income to high income status will remain a mirage unless taxpayer behaviour changes to embrace voluntary compliance. 

To date, Lekau says there are still taxpayer compliance challenges as well as low uptake of e-services. He said the country faces challenges such as low tax literacy.

He admitted that a transparent, service oriented tax administration that has the citizens’ trust is key to facilitation of a country’s realisation of the SDGs. He added that on the other hand, the willingness to pay tax stems from the government’s fair distribution of financial resources to provide social and other developmental services to the country’s population.

“Tax is a social contract between the state and the citizens, therefore taxation create a platform for the citizens to participate in state building,” said Lekau.

Since inception, BURS has realised an upward trajectory in revenue collections except during the 2009/10 economic downturn during recession. At the sometime, over the past four years the tax man’s contribution to the government budget has averaged 70 percent. 

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