As February draws to a close, pulses quicken as tax revenue collection tallies at P51.7 billion, according to BURS Commissioner General, Jeanette Makgolo. She informed the media that this falls short by a notable P3.5 billion from the anticipated P55.2 billion target of February. This hefty gap of approximately P9 billion looms ominously, compelling the tax collector to accelerate its collections in a bid to bridge the fiscal divide by the end of March.
In a reverting display of determination, Makgolo steps into the limelight, revealing that BURS has devised strategies to bridge the gap in the remaining weeks of the financial year.
The significance of revenue collected by BURS reverberates throughout the corridors of government funding. For the 2023/2024 financial year, Finance Minister Peggy Serame estimated this to account for 76 percent of the required funding for the annual budget of P81.7 billion. This places taxes as a vital lifeline to ensure the wheels of funding continue to turn seamlessly, with mineral revenue remaining uncertain.
With a month to collect the difference required to achieve the target of P59 billion, tax experts and economists alike predict otherwise.
Challenge for the tax authority to meet target
A tax consultant at Aupracon Tax Specialists, Jonathan Hore, states that achieving a target of P59 billion could prove to be a challenge for the tax authority.
“It appears that on average they are collecting P4.6 billion per month,” said Hore.
“To expect that they are going to collect the difference in just March alone could be very challenging.”
Similarly, Dr. Keith Jefferis, an economist and Econsult Managing Director, says it is highly unlikely that BURS will reach that target.
“This bearing in mind that a large share of BURS revenues come from SACU, which is paid quarterly and the final payment for the fiscal year was received in January,” said Jefferis.
“Based on total revenues of P51 billion by the end of February, the estimated total for the year is likely to be closer to P54 billion.”
He explains that if spending meets its target, this would result in a larger-than-anticipated budget deficit and, therefore, borrowing requirement.
However he states that it is also likely that expenditure will fall short of the budgeted amount.
“Tracking expenditure is, however, made more difficult by the problems with the Government Accounting and Budgeting System (GABS),” he adds, stating that the most recent published revenue and spending data is from July last year.
For the next financial year starting on April 1st, BURS has been tasked with revenue collection of P70.6 billion, an increase of P10.7 billion (17.9 percent) compared to the 2023/24 revised budget.
No Tax hikes
Interestingly, the Ministry of Finance has declared that immediate tax hikes are off the table, as the government embarks on a thorough examination of all tax legislation. This announcement came during the University of Botswana (UB) budget review seminar from ministry representatives.
The government is reviewing the Income Tax Bill which seeks to address the evolving nature of the business environment in the global economy more effectively, particularly to address emerging international tax issues. The Value Added Tax Bill seeks to address global business environment such as digitization, which is increasingly tilting the conduct of business transactions through online platforms and remote services, thus creating more opportunities for taxation. The Tax Administration Bill seeks to extract similar administrative provisions out of the Value Added Tax Act and Income Tax Act, with the objective of combining them under one new Act. The Customs (Amendment) Bill seeks to address implementation gaps in the administration of the Customs Act as well as modernise the law by capturing emerging issues under the World Trade Organization Trade Facilitation Agreement.
The government believes that the ongoing reviews will shape future policy decisions.
Maximising collections
As much as new taxes have not been announced, Hore believes that by BURS increasing its tax compliance level, then it will certainly achieve its mammoth task.
“They are getting a little bit aggressive, and with that, they should be able to achieve the P70 billion target,” Hore says.
The government is of the view that even if taxes were raised without tackling current loopholes in tax collection, revenue loss could continue unabated.
Hore said the BURS should engage in taxpayer education and campaigns. Billions in taxes are not being paid simply because people are not aware of that obligation.
Hore said most of the time is not that people are intentionally evading paying taxes, but because they lack knowledge.
“For pension funds, there are what is called exits where most entities are not aware of the tax implications,” says Hore.
“If someone exists from a pension fund before they reach 55 years old, they should be subjected to Pay As You Earn (PAYE) because they are not regarded as a pensioner before that age.”
Hore said there is a whole lot of scope within which BURS can expand its revenue base, which he asserts can be achieved mostly through public education.
Jefferies however, feels the BURS target for the next financial year is highly ambitious and would depend on some massive improvements in revenue collection from Value Added Tax (VAT) and income tax.
“It is not clear what those improvements would be based on,” Jefferies says.
Reforms and Strategies
Makgalo acknowledges that BURS aspirations are a tall order that requires them to make the most out of a suite of reforms and strategies to improve operational efficiency and voluntary tax and Customs compliance.
She mentioned the introduction of effective legal basis for the taxation of digital sales of products and services requiring remote service suppliers to charge VAT on procurement of these services by individuals and other exempt entities and remit to BURS. The legislative bills proposing the inclusion of taxation of the digital sales of products and services by remote service suppliers have been drafted and are expected to be presented to parliament in the July 2024 Parliamentary sitting.
Makgalo also noted the implementation of Electronic Invoicing (E-Billing) for efficient VAT collection. She said efforts to identify suitable expert resources are ongoing. BURS has requested Technical Assistance from UNDP to finalise specifications for project delivery, and some BURS officers have been sent for job shadowing at a sister Revenue administration that has successfully implemented the VAT e-billing solution.
There is also the implementation of Fiscal Marking and Monitoring Solution for Excisable products – The project on the introduction of the Fiscal Marking and Monitoring Solution for Excisable products aimed at enabling the marking, scanning, and authentication of all tobacco and alcohol excisable goods is ongoing. Following continuous engagements with the stakeholders and the appointed solution provider to facilitate the Design of the Solution during the year 2023/2024, Makgolo said it is expected that the solution will be implemented during the year 2024/2025.
Noting the importance of a National Single Window (NSW) in customs and trade towards streamlining and simplification of cross-border trade processes, BURS as the Lead Agency on the development of a National Single Window in Botswana, undertook a National Single Window Readiness Assessment with technical support from the World Customs Organisation (WCO).
“We are currently developing an implementation strategy with other related agencies, leveraging on the findings and recommendations of the report.”
The BURS has adopted several initiatives geared towards facilitating seamless movement of goods and raw materials necessary for industrialisation. These include the adoption of the One Stop Border Post Model, which has been implemented successfully at Kazungula Bridge Border Post and working towards establishing the same at the Mamuno border.
“We have also introduced the Authorised Economic Operator program to recognise and convey preferential treatment of our compliant traders at the borders.”
