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Billions of Pula escape BURS through trade misinvoicing

Publishing Date : 11 February, 2019


According to previous budget speeches, a trend that prevailed for years, Botswana has always been on deliberate fiscal deficit as the country was not raising more revenue against an ever stubborn expenditure.

While the second revenue source for government after minerals, customs and excise revenue, is estimated at more than P12 billion according to the 2019/20 Budget Speech, the Botswana Unified Revenue Services (BURS) continues to lose billions of Pula to trade misinvoicing as seen by Global Financial Integrity.

In what is captured as the highest form of financial criminality or an alarming type of money laundering, tax evasion culprits are reported to have used deceit to under-invoice imports in order to hide around P9.2 billion(US$885 million) from the tax man’s eye in 2015 according to Global Financial Integrity. In another form of cross-border black money transactions BURS would not get grip of P6.4 billion ($610 million) worth of exports which was misinvoinced so that it can miss the taxman’s radar.

Botswana is among the top three in the world when it comes to high misinvoicing levels. According to the Global Financial Integrity several nations have trade misinvoicing levels significantly higher than the global average of 18% including and those countries are seven. Botswana comes third at 31.8 percent after Sierra Leone (39.8%) and Georgia (34%) in terms of high misinvoicing levels.

According to the Global Financial Integrity, trade misinvoicing is a method of moving illicit financial flows, and includes the deliberate misrepresentation of the value of imports or exports in order to evade customs duties and VAT taxes, launder the proceeds of criminal activity or to hide offshore the proceeds of legitimate trade transactions, among other motivations.

Trade misinvoicing is also referred as a method for moving money illicitly across borders which involves the deliberate falsification of the value or volume of an international commercial transaction of goods or services by at least one party to the transaction. “Trade misinvoicing is accomplished by misstating the value or volume of an export or import on a customs invoice.

Trade misinvoicing is a form of trade-based money laundering made possible by the fact that trading partners write their own trade documents, or arrange to have the documents prepared in a third country (typically a tax haven)—a method known as re-invoicing. Fraudulent manipulation of the price, quantity, or quality of a good or service on an invoice allows criminals, corrupt government officials, and commercial tax evaders to shift vast amounts of money across international borders quickly, easily, and nearly always undetected,” says Global Financial Integrity.

Economic pragmatics who now believe there is need for a fiscal surplus in the public budget would observe that the estimated 2019/20 fiscal budget deficit of P7. 34 billion is an uphill task for a country which seeks to maintain fiscal sustainability but losing money to tax evaders. Of the total revenue of P60 billion, mineral revenue is the highest contributor at P21.09 billion 35.62 percent while customs and excise revenue is estimated to be at P`4.02 billion.As government has suggested along the years, it is always a challenge to collect tax revenue and in this case it can salvage a projected 2019/20 fiscal deficit of P7 billion or minus 3.5 percent of the GDP which is hiked by the estimated the P67.54 billion of the total expenditure and net lending for the same financial year.

But there remains a major challenge like the financial constraint of trade misinvoincing which Global Financial Integrity estimates that it is the reason for nearly US$1 trillion of unrecorded money shifts out of emerging market and developing countries annually. According to the US NGO Global Financial Integrity, trade misinvoicing remains an obstacle to achieving sustainable and equitable growth in the developing world. In his 2019/20 Budget Speech Kenneth Matambo said one of the fiscal areas that government will be focusing on going forward will be cost recovery and user fees.

“With the downside risks associated with the main revenue sources of mineral, customs and excise, and income tax, it is important that Government undertake a comprehensive review of the fees, levies and charges, with a view to determining their potential to contribute to total Government revenues,” said Matambo



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