*BURS strengthens domestic revenue mobilisation
*Taxman ushers in reforms as it chases P66.3 billion target
Botswana is undergoing its most significant tax system overhaul in decades with Botswana Unified Revenue Service (BURS) implementing sweeping reforms designed to modernize tax administration, protect the social contract, and boost national revenue amid declining mineral earnings. With the new changes the aim is to mobilise domestic tax revenue to approximately 13 per cent of the Gross Domestic Product.
Botswana’s new tax laws are expected to add about P2.47 billion to government coffers to fund national budget as mineral revenue continues dwindle.
Much of the funds amounting to P1.7 billion are expected to come from corporate income tax which has increased from 22 percent to 24.5 percent.
The newly increased 27.5 percent tax bracket for people earning more than P400 000 per annum is expected to yield P321 million while tax derived from online services bought from foreign suppliers is projected to raise an additional P450 million annually.
According to BURS Acting Commissioner General Phodiso Valashia, the reforms intend to make the tax system fairer and help Botswana to fund more of its own development.
“The nation should be ambitious enough to move decisively towards a tax-to-GDP ratio of 25 percent over the next three years, making the move more than a fiscal target. It is about a Botswana that increasingly finances its own development, strengthens its economic resilience, creates opportunities for its people and invests with confidence in its future. Prosperity is not created by taxation, nor can it be sustained by debt alone. Prosperity is created by productive businesses, innovation, investment and the hard work of our people,” said Valashia adding that the role of modern tax system will enable Botswana to strengthen its fiscal sovereignty and reduce excessive dependence on debt.
Among other things which the taxman has implemented include value-added tax on remote services, which is expected to be levied starting from October 1, with prior registration required.
For business-to-business supplies, VAT will be accounted for under the reverse charge mechanism.
Further, the newly enacted VAT law amendments extend the input VAT credit claim period from four months to 12 months, and where not utilized these credits will be carried forward for four months before being refundable.
The non-resident corporate tax rate is also set at 24.5 percent.
Acting commissioner, domestic taxes, Segametsi Radibe-Michael said they had reviewed all the revenue laws and a lot was coming out of the review project, one of those being the housing of procedural rules into one act which had come to be known as the Tax Administration Act.
“The new regulations we have now re-enacted means the old have been repelled. We have used a savings clause to make sure that in the meantime some of the regulations from the old laws can continue during the transition period, to make sure there is no gap. With VAT, the idea was to widen the tax base because the ambition was to operate a broad-base VAT system which taxed everything. VAT is a consumption tax, which means that its burden falls on the consumers and not businesses who are allowed to claim VAT charged by their counterparts. We also wanted to ensure widening of the segments of the VAT that were eroded to avoid the need for government to raise the rate,” said Radibe-Michael emphasising that the tax agency had to carry out the exercise in a phased manner, to ensure preparedness of both the revenue service and the tax payers.
Further, the legislation also includes comprehensive provisions governing the creation of permanent establishments; establishes a tax on repatriated profits for non-residents; and introduces a three percent withholding tax on insurance premiums.
The Tax Administration Act has also been amended to introduce a binding tax ruling system, provide for the registration of tax agents, create the Tax Tribunal, and provide for an eight-year record-keeping requirement for both VAT and income tax.
