Off-budget levies undermine governance

SHARE   |   Tuesday, 22 September 2015   |   By Kabelo Adamson

A draft paper prepared by a consultancy company Sweet Fountain on behalf of Business Botswana has raised concerned about the proliferation of levies in the country.

The paper titled “The impact of commercial levies on business”, which was discussed with Business Botswana members on Friday, suggests that the use of a plethora of ‘off-budget’ levies and special funds undermines good and accountable governance, when considering the authority and oversight of Parliament regarding public finances.
The report states that the collection of levies by some authorities other than unified and constitutionally provided service such as Botswana Unified Revenue Service (BURS) only serves to compromise the efficiency of the national revenue collection system.

According to the report, some levies such as the environmental levy on shopping plastic bags stood uncollected by the appropriate authority for ages and in instances where authorities do collect, such as the case in the casino levy, doubts are being raised as to whether the Casino Control Board or the Gambling Authority has the competence to meet the intended revenue collection.
It has been noted that in the report that whilst the related economic utility must be acknowledged, the low-maintenance and high-yield excise revenue sources should not be used as a proxy or means of bypassing established revenue collection mechanisms like BURS or the Southern African Customs Union (SACU).

Other concerns raised by the consultants are of accountability. It has been suggested that it is important to account for all levies in a manner that would be recommendable by constitutional or approved public accounting offices, such as the Auditor General and the Accountant General.

The consultants argue that the actual practice of accountability has been determined to be a challenge or proven to be opaque and not in consistent with best practice.

Levies that are perceived to be problematic by the business community include the UHT milk levy, wheat flour levy, alcohol levy, road safety levy, tourism levy and BOTA training levy.

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It has been noted that the 40 percent imposed on importers of Ultra Heat Treated milk has become an additional cost to other industries that may wish to use the imported milk as an input for production of other dairy food items. It has been recommended that the levy be scrapped off as there is no empirical evidence justifying its existence.
With regards to the wheat flour levy, it is observed tha the 15 percent levy collected on imports of bread flour negatively affects all industries which are linked to the wheat and flour sector such as bakery, dairy and the beverage sector.

The major problem facing other levies is aligned to the issue of accountability and has been suggested that they be reviewed.
The consultants were alarmed by the fact that levies do not go through the Consolidated Fund, and therefore not subjected to the oversight of the Ministry of Finance and Development Planning (MFDP).

It has is said that allowing institutions such as Gambling Authority to collect levies is inefficient as their acumen regarding the comprehensiveness of systems management has not been proven.
In the view of Business Botswana, another efficiency and adversity is that certain of entities that collect levies end up holding funds in excess of what they require for their regulatory or other such operations, and therefore demonstrating that the levies are too high.

In recommendation, it has been suggested that a review and some analytical work be undertaken by government to establish whether the use of levies or special funds should not be rationalised. Further to that, it is recommended that part of the review should be to determine whether households are at all benefiting from levies.
When responding to the presentation, some Business Botswana members felt they were never consulted during the consultancy stages and hence doubted the correctness of the paper while others argued that the consultants took too long to process the information and ended up covering the whole section of levies.

Once having gone through the Business Botswana structures and adopted, it will be forwarded to the National Assembly for consideration.