Draft budget estimates released this week by the Finance ministry show that BURS has an even steeper mountain to climb in the new financial year which begins on April 1. According to the numbers, the BURS will be tasked with collecting P71.3 billion in the 2024-25 financial year, a figure that represents 76% of the P93.5 billion in revenues government expects to accumulate. The task before the BURS is essentially to collect nearly 80 thebe out of every pula the government expects to receive in the next financial year. Piling more pressure onto the challenge is the fact that the collection target the BURS has this year, is linked to a high-stakes stimulus budget in which authorities are planning historic spending of P102.3 billion. While a sizeable portion of the BURS’ collection target is out of the taxman’s control, such as the level of mineral taxes and customs revenues, the portion under the agency’s power to influence is earmarked for significant increases in the next financial year.
For instance, the draft estimates forecast that non-mineral income taxes will increase from P15.9 billion this year, to about P22 billion in 2024-25, while Value Added Tax (VAT) is expected to jump from P12 billion to P15 billion over the same period. All told, government is hoping the BURS powers revenues to the forecast P93.5 billion level in 2024-25, but questions are already being raised about these projections. “There are huge increases projected in domestic revenues, notably non-mineral tax and VAT of nearly 40% for income tax and 30% for VAT,” prominent economist, Keith Jefferis, said at the FNBB budget review on Tuesday.
“That’s quite ambitious given that we have no new taxes or tax increases and so I’m a bit sceptical,” he said.
Jefferis, who previously completed a three-year assignment at the Finance Ministry as a senior economic policy advisor, said while the revenues projected for the next financial year would keep the deficit “fairly small” the forecasts flew against other indicators in the global economy. “I’m a bit sceptical about some of these revenue figures. “There’s only a small reduction expected in mineral revenues, of about five percent, but when you read any of the diamond trade commentaries right now, if we only had a five percent reduction, that would be a very good outcome. “If you look at Rapaport, one of the main diamond trade commentaries, they are projecting a 20% decline in Botswana’s diamond revenues this year, after a 37% decline last year. “So, that minus five percent is quite ambitious,” he said.
In her budget speech on Monday, Finance Minister, Peggy Serame, gave the BURS a vote of confidence, noting several reforms that the agency is undertaking to improve its collections.
“To close leakages and maximise revenue, BURS is implementing Electronic Invoicing for efficient VAT collection, with the first phase of the three-year project scheduled for completion in December 2024,” she said.
“Furthermore, BURS is implementing a solution to digitally mark and track excisable goods (track and trace), and the digital solution will be fully implemented by July 2024.”
Other initiatives include online tax filing systems, online customs declarations, electronic payment (electronic funds transfer) as these platforms simplify tax compliance for individuals and businesses, fostering a business-friendly environment and encouraging investment, Serame said. The BURS, whose own tax gap analysis found that up to 60 percent, or nearly two in three taxpayers are dodging their obligations, has been brimming with confidence in pursuit of its annual targets in recent years.
By October, the agency was confident of chasing down the P60 billion tax target for the 2023-24 financial year, despite the wide range of exemptions and zero-ratings introduced by the Finance ministry earlier in the year. Part of the success in meeting targets has been strong mineral taxes and the economy’s rebound from COVID-19, together with associated government financial packages for businesses.
The dire projections for key sectors such as diamonds, coupled with the normalisation of growth rates in the economy could squeeze the BURS’ inflows. Analysts do expect that looking into the medium term, the tax agency will reap the benefit of this year’s stimulus budget as the funding activates greater economic activity. The P71.3 billion for the coming year could however prove a mountain too high to climb for the BURS.
