Finance minister, Kenneth Matambo, says his ministry continues to work on the simplification of the country’s tax administration by developing a Tax Administration Act to improve the efficiency of tax revenue collection. When delivering the 2018/19 budget speech on Monday, Matambo said progress in drafting this legislation has been slow, but the process is expected to be completed during the next financial year. He said the ministry is also working on the review of the Income Tax to introduce Transfer Pricing Rules. “Review of the layman’s drafts of the bills is on-going and the plan is to have the laws approved by Parliament in 2018,” Matambo said. In an effort to comply with international standards, Matambo said government is undertaking a review of the Botswana International Financial Services Centre tax regime in order to remove any perception that Botswana is a tax haven. This is also meant to increase Foreign Direct Investment (FDI) and overall tax collections. He explained that the review will be undertaken as part of the Income Tax (Amendment) Bill scheduled for presentation to Parliament during 2018. Another on-going review of the fiscal legislation, the minister said, relates to the Financial Intelligence Act and Regulations to address the shortcomings identified by the Mutual Evaluation Review for Botswana by the Eastern and Southern Africa Anti-Money Laundering Group in May 2017. “Our intention is to have all the proposed amendments approved by Parliament during the course of 2018,” Matambo said.
Botswana is believed to have one the lowest tax regimes with income tax starting at over P36 000 earnings per annum while corporate tax stands at 22 per cent for resident company and 30 per cent for non-resident company.
There are exceptions though. For example a resident company approved for manufacturing is taxed at 15 per cent while International Financial Services Centre (IFSC) Company – approved services income, is taxed at 22 per cent. Speaking at the FNBB Budget Review on Tuesday, a day after Matambo delivered the speech, a tax consultant Jonathan Hore said Botswana’s tax system overhaul began in 2012 with the introduction of the new withholding taxes such as rent, commission, and mine rehabilitation surplus to increase revenue.The revamping of the system, he said, also involved harmonisation of the interest in BURS charges so that all of them become compound 1.5 per cent per month or party thereof to simplify tax administration. Hore, who is a Managing Tax Consultant at Aupracon, said the overhaul of the system continued beyond 2012 with three main aims being to simplify the tax system and make compliance easier, thereby increasing collections; finding alternative revenue streams in the wake of dwindling diamond and SACU customs revenues; and focusing on quality investments. Hore said the coming Transfer Pricing Rules will increase revenue collections and make local tax laws in tandem with international practices and help in avoiding leakages of revenues through exorbitant interchange group charges such as management fees, royalties and others. The tax consultant said in order to increase revenue base, government should consider taxing the underground economy such as businesses and individuals who are engaged in profitable economic activities and whom most of the time do not contribute to tax. These include multi-residential owners, taxi and combi operators and others. He suggested that government should introduce presumptive tax. Besides taxing underground economy, Hore said government can consider introducing wealth tax. He explained that tax for anyone earning P12 001 is levied at the same rate (25 per cent) as someone earns P200 000 per month, something which he described as unfair. He therefore suggested that a tax rate of 30 per cent of someone earning above P100 000 could be introduced as way of dealing this this disparity.