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IMF Urges Botswana To Strengthen Tax Collection

by Robert Lee, Tax-News.com, London

09 August 2017


The Government of Botswana should seek to strengthen its revenue base amid volatile revenue flows from the diamond mining sector and the South African Customs Union, the International Monetary Fund has said.

According to the IMF's recent report on the Botswana economy, despite improved prospects in the global diamond market, increasing tax revenues will help to maintain stability and maintain the level of public spending.

"The authorities agreed that there is a significant potential to boost domestic revenues through tax administration and tax policy reforms that could further insulate Botswana from fluctuations in diamond revenues or receipts from the Southern Africa Customs and provide additional funding for future fiscal expenditures," the report stated.

Botswana is currently in the process of improving tax administration, and has introduced reforms such as electronic tax filing, in addition to the establishment of a risk management unit at the Botswana Unified Revenue Service. However, it noted that implementation of the reforms has been "challenging," and that the collection of tax "has been hampered by administrative costs and other constraints."

"Looking ahead, the authorities need to expedite the passage into law and implement the new Tax Administration Act (which modernizes tax procedures) and strengthen the audit and risk functions of the Large Taxpayers Unit (which collects the bulk of tax revenue)," the IMF said.

The report also proposes number of tax policy reforms with a view to simplifying the value-added tax, personal income tax, and corporate tax.

"First, the authorities could streamline VAT exemptions and replace those used for social purposes (e.g. on food items and transportation services) with targeted social transfers," the Fund said, adding:

"Second, they could simplify the personal income tax by instituting a single rate final withholding tax on all passive capital income and capital gains and relieving employees with a single source of labor income and no active capital income from filing annual tax returns."

"Third, they could accelerate plans to register and re-evaluate properties to broaden the tax base and geographic coverage."

"Lastly, they need to ensure that any corporate income tax concessions (including on economic zones) are granted sparingly and in the form of accelerated depreciation schemes or investment tax credits."

TAGS: South Africa | tax | investment | value added tax (VAT) | mining | law | employees | audit | tax credits | food | withholding tax | Botswana | services | Africa | Tax

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