Botswana Plans To Broaden Tax Base, Strengthen Compliance

by Robert Lee, Tax-News.com, London

26 July 2004

Botswana’s Finance and Development Planning Minister, Baledzi Gaolathe has said that changes aimed at broadening the tax base, limiting exemptions and promoting compliance will raise an estimated P50 million ($10.8 million).

Among the measures proposed in the Income Tax (Amendment) Bill in Parliament last week were limitations to exemptions on the disposal of shares, limitations on the deductions for lease payments for the use of motor cars, and restrictions on deductions for farming losses.

Gaolathe also outlined plans to enhance the valuation of the housing benefits that some employers extend to employees as fringe benefits.

"The valuation of the benefit is being increased from 6% to 10% of the rateable value and in the case of properties that are not rated, the valuation is being enhanced from 5% to 8% of the current capital valuation of such property," the Minister explained.

In another revenue raising measure, charitable, religious and other mutual benefit organisations will be subjected to tax "unless they prove to the Commissioner, by filing tax returns and supporting documents that the income they derive has been or will be applied for public purposes."

In addition, rules have been relaxed for International Financial Services Centre (IFSC) companies, which had previously only been permitted to transact business with non-resident and other IFSC companies.

To avoid transfer pricing abuses, it has been proposed that income from approved transactions with resident companies should be subject to the same rate of corporate tax as applies to non-IFSC companies.

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