07 Mar 2018

Ministry of Finance and Economic Development has in late 2017 started to undertake a review of the Value Added Tax (VAT) Act with the support of the International Monetary Fund (IMF).

Speaking in Parliament on March 6, the Minister of Finance and Economic Development, Mr Kenneth Matambo said the work was at an advanced stage and that the ministry was committed to ensuring the completion of work and presenting the VAT (Amendment) Bill to Parliament in the November, 2018 sitting of Parliament. 

Mr Matambo said the ministry has not included any increase in the tax rate in the review of the VAT Act.

“Review of tax rates does not depend on whether a tax is a consumption or not. Tax rates are set with the objective of obtaining a balance between the need to raise revenue for government, burden on taxpayers and the impact on the growth of the economy,” he said.

He said the review of the VAT Act would look primarily into the rationalisation of various concessions under the VAT Act that had the effect of eroding the tax base such as zero rating and exemption of goods and services.

In addition, Mr Matambo said the review would also consider whether there were alternatives that would ensure a balanced VAT system that did not compromise collections, but able to meet the demands of both businesses and consumers.

He said this in response to a question from MP for Selebi Phikwe West, Mr Dithapelo Keorapetse who had asked the minister if there was any ongoing review of the VAT Act.

He also asked if there were plans to increase VAT as part of the review and why VAT would be increased when it was a consumption tax borne by the final consumer.

Furthermore, he wanted the minister to explain what was being reviewed.

Still in Parliament, the minister said Botswana Unified Revenue Services has experienced staff shortages and other constraints which had cumulatively hampered effective delivery of services to taxpayers.

He said shortage of manpower had particularly been realised in the areas of debt management, tax audits and investigations.

Minister Matambo said this in response to another question from Selebi Phikwe West legislator.

In order to address these challenges, Mr Matambo said BURS had recently made significant investments in the use of information technology to simplify processes and enhance its operations.

He said BURS had since 2017 implemented a new organisational structure which provided for additional manpower for the better carrying out of its tax revenue mobilisation and border management mandates.

The minister said his ministry and BURS had indeed recognised that the area of enforcement was an area that required urgent attention, therefore BURS was increasing the manpower resources in that area of work.

In addition, Mr Matambo said BURS had realised the need to develop skills in the fight against new generation tax avoidance schemes such as transfer pricing and treaty shopping.

“BURS continues to collaborate with other revenue authorities and international organisations such as the African Tax Administration Forum (ATAF) and the Organization of Economic Cooperation and Development (OECD) to train and build capacity of its officials in these critical skills,” he said.

He expressed confidence that the implementation by BURS of the foregoing measures would go a long way in addressing the resource constraints.

Further, Minister Matambo indicated that his ministry had given consideration to allow only high income earners and those with additional income to file tax returns. 

He however said the implementation of the initiative had been delayed to allow for the uptake of such measures to improve its performance and taxpayers compliance such as the use of technology.

MP Keorapetse had asked the minister if it was true that BURS was facing shortage of staff making it unable to carryout adequate enforcement activities to further maximize revenue.

He also wanted the minister to explain those manpower constraints and also if the ministry was considering to require only high income earners and those with additional employment to submit personal income tax returns to enable staff to focus on more productive collection undertakings. ENDS