Botswana loses revenue through digital economy

• BURS is worried inability to tax multinationals • Wants google taxed

Botswana loses revenue through digital economy

The world is moving towards digitalisation where almost every aspect of human life depends on the digital world. Technology has therefore transformed the manner in which individuals and companies do business, but this has come with its own shortcomings.

A case in point is the inability of the Botswana Unified Revenue Service (BURS) to tax digital economy businesses, leads to loss of revenue for the country. Speaking on this topical issue at the First National Bank Botswana’s (FNBB) budget review seminar this week, an official from BURS, William Nkitseng, conceded that they had not devised ways of tackling this development.
“Currently we don’t have statistics of how much we are losing by not taxing Google,” he said. “There should be standards adopted for taxation of the digital economy.”
To address this, Botswana joined the Organisation for Economic Co-operation and Development (OECD) in 2017. This means that Botswana is now a part of the Inclusive Framework on Base Erosion Profit Shifting (BEPS).

As a member of the Inclusive Framework on BEPS and   working with G2O countries, Botswana has committed to curbing instances of tax avoidance by multinationals.The international community recently reaffirmed its commitment to address challenges presented by digitalisation. “The Inclusive Framework on BEPS, which groups 137 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, decided during its January 29-30 meeting to move ahead with a two-pillar negotiation to address the tax challenges of digitalisation, ”reads a statement from OECD website.

“Participants agreed to pursue the negotiation of new rules on where tax should be paid (‘nexus’ rules) and on what portion of profits they should be taxed (‘profit allocation’ rules), on the basis of a ‘Unified Approach’ on Pillar One, to ensure that MNEs conducting sustained and significant business in places where they may not have a physical presence can be taxed in such jurisdictions. The Unified Approach agreed by the Inclusive Framework draws heavily on the Unified Approach released by the OECD Secretariat in October 2019.”

The Inclusive Framework by BEPS has recommended that businesses pay a minimum level of tax.
Owing to the sophistication of the digital world, many countries around the world are still struggling to collect revenue(s) made through digital economy businesses in their jurisdictions.