23 Apr 2013

Parliament has been told that government does not believe time has come to review the policy of allowing investors to repatriate their profits.

Answering a question in Parliament, the Assistant Minister of Finance and Development Planning, Mr Vincent Seretse said he reached his conclusion taking into account two considerations.

He said the first consideration is that profits of foreign investors are already subject to standard rates of corporate income tax at the prevailing rate of 22 per cent.

The Assistant Minister Seretse said dividends are also subject to a withholding tax of 7.5 per cent.

He said in this way Botswana is able to get its fair share from any foreign investment proceeds.

On the second note, he said the introduction of such a policy would be in defiance of standard international norms; and indeed, consistent with IMF Article VIII obligations, the country would require the explicit approval of the International Monetary Fund to do so.

Further, such policy action would run counter to and undermine efforts to attract foreign investment in Botswana, including Economic Diversification Drive.

The assistant minister therefore said in this regard, a policy designed to bar profits would not yield more dividends to the country.    

Furthermore Assistant Minister Seretse said an impression should not be created that foreign-owned entities operating in Botswana do not already re-invest significant amounts in the economy.

He said this is because Botswana’s detailed balance of payments estimates prepared by Bank of Botswana, during the period 2008-2012 shows that retained earnings (that is, profits of foreign-owned businesses that were not repatriated) totaled P7.6 billion.

Mr Seretse said this amount accounts for 80 per cent of recorded inflows of foreign direct investment over the same period.

Meanwhile, he said from what he have already explained that the very controls by MP Fidelis Molao are far from curbing capital flight, but rather would likely encourage it instead.

Tonota North MP, Mr Molao had asked the minister whether the time has not come to review the policy of allowing foreign investors to repatriate their profits back to their countries without any deliberation mechanism to ensure that part of their profits are invested locally.

He further wanted to know if this will not yield more dividends for the country and curb capital flight. ENDS