Government targets tighter control of second-hand vehicle industry

Moves to strengthen tax compliance and curb money laundering • Electronic VAT system to track vehicle dealers • VP Gaolathe acknowledges sector’s economic importance The government plans to tighten regulation of Botswana’s imported second-hand vehicle industry in a bid to curb tax leakages and illicit financial flows associated with vehicle imports. Vice President and Finance Minister Ndaba Gaolathe told Parliament that government is working to formalise the sector while strengthening oversight and tax compliance. Gaolathe made the remarks while responding to a question from Letlhogonolo Barangwang, Member of Parliament for Mogoditshane East, who had asked what policy reforms government is implementing to regulate the industry and prevent trade-based money laundering linked to vehicle imports. Barangwang also asked how institutions such as the Botswana Unified Revenue Service, the Financial Intelligence Agency, immigration authorities and the Department of Road Transport and Safety integrate data to detect illicit activities in the vehicle importation and sales market. Gaolathe acknowledged that the second-hand vehicle sector plays an important role in Botswana’s economy by facilitating mobility, supporting small businesses and creating employment. However, he noted that the sector also carries risks. “As with many industries that involve cross-border trade and significant cash-based transactions, the second-hand vehicle sector may present vulnerabilities that expose the country to tax leakages and illicit financial flows if not properly regulated,” Gaolathe said. He explained that the business of importing and selling pre-owned vehicles is reserved for citizens under Regulation 24 of the Trade Regulations of 2020, which limits the activity to citizen-owned businesses. The government is also reviewing legislation governing the sector. According to Gaolathe, the Ministry of Trade and Entrepreneurship is in the process of amending the Trade Act to introduce a “fit and proper” requirement for licence applicants in the vehicle dealership sector. The requirement is intended to prevent criminals or their associates from obtaining licences to operate car dealerships. “This measure is meant to strengthen the licensing framework, protect consumers and uphold the integrity of the market,” Gaolathe said. Government has also strengthened customs valuation controls at points of importation and introduced enhanced post-clearance audit mechanisms to verify the accuracy of declared vehicle values. Government monitoring Gaolathe said authorities are increasingly coordinating efforts across multiple government agencies to detect and combat trade-based money laundering linked to vehicle imports. The Botswana Unified Revenue Service is working closely with the Financial Intelligence Agency and other government departments responsible for law enforcement, immigration and transport regulation. He said the Department of Road Transport and Safety has integrated its vehicle registration and licensing system with that of BURS. Under the system, vehicle information from BURS automatically populates the DRTS platform once customs clearance has been completed. “This means that DRTS cannot register any vehicle that has not been cleared by BURS,” Gaolathe said. In addition, vehicles must also receive clearance from the Botswana Police Service to ensure that stolen vehicles are not registered in Botswana. Gaolathe said the Financial Intelligence Agency also uses intelligence tools to detect and investigate trade-based money laundering linked to vehicle imports and other trade-related activities. Intelligence gathered by the agency is shared with relevant authorities for investigation and enforcement. Digital invoicing Meanwhile, Gaolathe said government is also introducing digital invoicing reforms aimed at strengthening tax compliance. He told Parliament that the Value Added Tax (Amendment) Act, passed in November 2025, introduced a legal framework for electronic VAT invoicing. Once implemented, the Electronic VAT Invoicing System will require VAT-registered businesses — including vehicle dealerships — to issue digital invoices that are transmitted directly to the tax administration system in real time or near real time. “This reform will significantly improve transparency in commercial transactions, reduce opportunities for underreporting of sales and enhance VAT compliance,” Gaolathe said. He added that the system will also provide government with stronger data analytics capabilities to detect irregular trading patterns and potential tax leakages. Gaolathe said government remains committed to strengthening compliance, combating illicit financial flows and modernising revenue administration across the economy.

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Government targets tighter control of second-hand vehicle industry

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