BURS’ search for missing tax billions starts with booze industry
Mbongeni Mguni | Monday July 4, 2022 09:48
Experts at the Botswana Unified Revenue Service (BURS) believe that if every taxpayer in the country paid their dues, there would either have been no need for the shock tax increases last year or at least the levels of the increments would have been lower.
Instead, a highly revealing tax gap analysis by the agency has found that up to 60 percent, or nearly two in three taxpayers are dodging their obligations, meaning a higher burden on those who actually pay their dues.
With a target of collecting P46.4 billion in taxes this year, representing about 70% of government budget revenues, and with little room left to increase tax rates on those who are compliant, the BURS says it is stepping up its efforts to collect every last drop due to the treasury.
One of these efforts involve instituting the “track and trace” initiative for the alcohol and tobacco industry, which BURS has identified as one of the sectors where tax revenues are slipping through the agency’s fingers.
The trouble, the tax agency says, is that the industry, particularly in alcohol, has a high number of taxes, levies and other statutory revenues due to government, which makes under-reporting and understatement rampant.
Track and trace is the key to ensuring the industry is actually paying all of these obligations over, the taxman says.
“This is a solution that places a biometric imprint on products as they are manufactured, just like in the case of the national currency, which makes them traceable and easy for verification,” BURS’ operations commissioner, Phodiso Valashia told Mmegi during a briefing this week.
“At that point, the BURS would have all the information about how the product was made, what tax was paid or not and other data with the intention being to deal with issues such as making sure the correct revenue is collected because there’s a lot of understatement and non-declaration in this industry.
“We have been seeing trucks coming in with alcohol or cigarettes undeclared but with this type of information on every single product in the economy, we can check at any point if the product is legitimate.
“It’s also an issue of fairness in the market because some cannot be paying tax, while others are enjoying their profits.”
The track and trace system is not new. The initiative has been on the cards since at least 2016 and has been strongly resisted by the alcohol and tobacco industry, with the key contention being the cost of the biometric marker and who should bear the cost.
For the alcohol industry, players such as Kgalagadi Breweries Limited, the country’s biggest producer, view the biometric imprint or stamp as useful but an additional “tax” on their operating costs, which since 2008 have been squeezed by the alcohol levy.
The Botswana Alcohol Industry Association has in the past said the track and trace system, at the level of costs per stamp proposed by the BURS, would have disrupted the industry to the “point of closure”. The BURS intended to introduce the stamp in 2017 at a cost of 30 thebe per stamp, with producers also required to set up machines to do the imprint. For producers such as KBL who pump out millions of units per year, the costs would have been significant.
The Association argued that up to 98% of local alcohol trade was easily traceable and the battle was escalated to the Finance Ministry where it appeared to have been put on the back shelf.
This week, Valashia said the time for talk had ended and the track and trace was going ahead.
“We have been consulting the alcohol and tobacco industry since 2016 and we have agreed on certain things and disagreed on others,” he told Mmegi.
“We have not agreed on the cost because the industry wanted the stamp at certain thebes and we offered it at a certain amount.
“It’s still a disagreement but we want to believe that with such a solution, it must be self-liquidating because it is not us running this, but outsourcing it to them.
“The industry said we should leave the compliance solution to them as the private sector and they even said so last week.
“We had given them from 2016 to understand the landscape in terms of smuggling and under-reporting, but that has not changed and that’s why we have said in this financial year, having given them those years to come up with a solution, it is time for BURS to bring its solution.”
Besides the alcohol and tobacco sector, the BURS is also setting its gunsights on other players in the economy, in search of the billions of Pula bypassing the fiscus. According to Valashia, these missing billions are spread across different industries, taxpayer types and tax types. For Value Added Tax, which this year is expected to reach P12 billion or a quarter of total collections, the BURS is going digital.
“In this financial year, we are planning to introduce VAT electronic billion solutions and we have actually gone out to benchmark with other countries of comparable status,” Valashia said.
“We believe something like that can go into the formal and informal sector and has the potential to help close the tax gap that currently obtains.”
For Pay as You Earn tax, the BURS plans to heighten awareness on the need to file returns, as the tax year begins in July. This year, the agency plans to conduct a national launch for the filing season on July 5 in Francistown and step up its educational campaigns on the Internet and social media.
Together with stronger auditing and the digitisation of its collection and payment methods, the BURS hopes to close the tax gap and ensure more taxpayers are actually contributing their part.
“People must realise that this economy is in their hands and no one is going to finance us from outside,” Segolo Lekau, BURS commissioner customs, told Mmegi.
“If we need to pay for roads, hospitals and others, who is going to help?
“We have to do the right thing and if we collect from everyone, then the revenue shortfalls would not hit us that hard.
“Let’s all pay so that we can take these services such as electricity, water and roads, to the people.”