Move designed to curb illicit financial flows
In an attempt to curb the billions of Pulas reportedly lost to illicit financial flows, government have amended the Income Tax Act.
This was announced by Finance Minister, Kenneth Matambo during his presentation of the Budget Speech before parliament on Monday.
Matambo revealed the amendment happened in December following a review of the Botswana International Financial Services Centre tax regime.
He explained government have introduced Transfer Pricing Rules to guard against attempts by multi-national corporations to minimize their tax liability by transferring profits to low tax jurisdictions in order to pay less tax.
Matambo said these measures have been put in place to expand the country’s tax base revenue and also to enable the revenue authority to effectively discharge its mandate.
“It is for this reason that focusing on simplifying the tax legislation continues to be a priority as a way of enhancing tax compliance, while at the same time reducing the cost of tax administration,” stressed the minister.
Government is also looking to amend the existing Transfer Duty Act, which is set to be presented before parliament in March this year.
The bill seeks to modernize and close existing gaps in the current law.
One of the notable changes will be the exemption of citizens from paying transfer duty under certain circumstances. These include when a citizen acquires residential property for the first time to be used as their own home.
The amendment will also result in the increase of the exemption threshold from P200, 000 to P500, 000 for purposes of computing duty payable upon transfer of property.
Government anticipates this will promote home ownership, especially amongst young families and people ‘starting their lives’.
Furthermore, Matambo says during the course of the upcoming fiscal year, he will be pursuing the amendment of the Capital Transfer Tax Act to align it with the Transfer Pro Tax Now.
The amendments will include removing the ceiling of P15, 000 for exemption of transfer of property such as household goods and personal belongings to heirs as well as increasing the value of gifts that are exempted from being taxed from P5, 000 to P25, 000.