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Weak mining sector pulls down tax revenue

The 2016 Botswana Unified Revenue Services (BURS) Annual report has revealed that the weak performance of the mining industry plugged the tax revenue collection into a decline.

 

The BURS collected P35.335 billion during the 2015/16 financial year, although the collection exceeded the tax revenue target of P34,694 set by government by P641 million or 1.85% for the year under review, it was a significant drop in value terms. According to the report the tax revenue collected in 2015/16 reflects a decline of 5.75% when compared to the P37.489 billion that was collected in 2014/15. This decline is due to weak performance across the mining sector which resulted in a decline of income tax collections from P15.884 billion in 2014/15 to P13.832 billion in 2015/16.


Writing in his Commissioner General’s review, Mr Ken Morris states that despite surpassing the target by 4.66%, the VAT collection declined by 3.76% while SACU receipts increased by 0.8% compared to the previous year. For the financial year 2015/16, BURS spent P534.079 million to collect P35.335 billion which translates into a cost to collection ratio of P1.00/P66.16.


“This means for every P1.00 that BURS spent; the benefit to the Government in return was P66.16. Compared to the previous year’s cost to collection ratio which was P1/P79.85, this indicates a significant ratio decrease amounting to P13.69 collected per Pula spent. The decrease was due to the unsatisfactory economic performance which yielded less revenue and to the increase in the cost of goods & services,” he stated.


Tax Revenue as a Percentage of GDP

As a percentage of GDP, tax revenue collections showed an upward and consistent growth from 2010/11 from 20.9% to 25.4% in 2014/15. Over the period since inception tax revenues as a percentage of GDP have been hovering around an average of 25%, generally indicating that the collections are roughly following the growth of the Gross Domestic Product (GDP). However, the BURS annual report captures that for the 2015/16 financial year tax revenue as percentage of GDP went down to 23.5% from 25.4% in the previous year.

Comparison of Tax Revenue Collection with the Previous Year

Tax revenue declined from P37.489 billion to P35.335 billion for the period under review. The decline in revenue collection is attributable to income tax which fell from P15.884 billion in 2014/15 to P13.832 in 2015/16. VAT also contributed to the decrease of the collection by falling from P5.907 billion to P5.685 billion.

Income Tax Revenue Collection

Income tax revenue collection for the year is derived from different sources as shown in the table below. The major source of the tax collection is from the Assessed tax whose contribution to the total collection was 50.12% followed by deducted tax which contributed 35.97%. Assessed tax registered a significant decrease of 27% due to the poor performance of the Mining sector which resulted in lower tax revenue assessed than in 2014/15.

Value Added Tax Revenue collection

The gross VAT collection for the reporting period was P8.495 billion while the total VAT refunds paid to taxpayers amounted to P2.810 billion resulting in the net collection of P5.685 billion. The major contributor to the total VAT is Import VAT since Botswana is a net importer. For the period under review import VAT and Internal VAT increased by 1.03% and 0.71% respectively while all other sources went down with penalties going down by a significant margin implying an improvement in compliance. The refunds went up by 9.67% compared to a 12.6% decrease in the previous year.

SACU Revenue Shares

The total SACU Revenue Pool for Year under review was R88.898 billion. This was a slight decrease from the 2014/15 Pool which amounted to R89.201 billion. Despite this decrease, Botswana’s share from the Pool stood at R20.039 billion in 2015/16 compared to R19.276 in 2014/15, which represents an increase of R763 million or 4%. SACU receipts continue to be an important source of revenue for the Government of Botswana.

Customs and Excise Duty Collections

As a member of SACU, Botswana like other SACU Members is expected to pay all the collections of customs, excise and additional duties into a Common Revenue Pool (CRP). During the year under review, Botswana collected and paid a total amount of
P451.1 million into the CRP compared to P330.5 million which was collected in the previous financial year. This represents an increase of P121.6 million. This substantial increase was mainly due to significant increases in Excise duty and Additional duty.

Collections on Behalf of Government Departments

During the period under review, BURS collected P507.9 million on behalf of
Government departments and agencies compared to P475.4 million in the previous year. A larger part of the collections came from the Alcohol Levy and Transport Permits which accounted for 64.1% and 23.8% respectively (compared to 62.8% and 22.4% respectively in 2014/15).

Tobacco Levy which was introduced in the 2014/15 financial year contributed


9.4% in its first year of collection which was more than the 7.8% it contributed during 2015/16. The increase in Alcohol levy collection was occasioned by a change in the formula for calculating levy by including Excise duty on locally produced alcoholic beverages and therefore resulting in an increase in the tax base and hence an increase in levy collections.

 

The other contributing factor was the increase of the levy rate from 50% to 55% for alcohol beverages with an alcohol content of more than 5%. In case of Transport Permits, the increase was a result of an increase in the volume of foreign registered vehicles which entered Botswana during the reporting period.

Customs and Excise Duty Collections

As a member of SACU, Botswana like other SACU Members is expected to pay all the collections of customs, excise and additional duties into a Common Revenue Pool (CRP). During the year under review, Botswana collected and paid a total amount of
P451.1 million into the CRP compared to P330.5 million which was collected in the previous financial year. This represents an increase of P121.6 million. This substantial increase was mainly due to significant increases in Excise duty and Additional duty.

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Civil Service volatility: Democracy vs Bureaucracy

19th April 2021
President Masisi

Here is how one Permanent Secretary encapsulates the clear tension between democracy and bureaucracy in Botswana: “President Mokgweetsi Masisi’s Government is behaving like a state surrounded with armed forces in order to capture it or force its surrender. The situation has turned so volatile, for tomorrow is not guaranteed for us top civil servants.

These are the painful results of a personalized civil service in our view as permanent secretaries”. Although his deduction of the situation may be summed as sour grapes because he is one of the ‘victims’ of the reshuffle, he is convinced this is a perfect description of the rationale behind frequent changes and transfers characterising the current civil service.

The result of it all, he said, is that “there is too much instability at managerial and strategic levels of the civil service leading to a noticeable directionless civil service.” He continued: “Changes and transfers are inevitable in the civil service, but to a permissible scale and frequency. Think of soccer team coach who changes and transfers his entire squad every month; you know the consequences?”

The Tsunami has hit hard at critical departments and Ministries leaving a strong wave of uncertainty, many demoralised and some jobless. In traditional approaches to public administration, democracy gives the goals; and bureaucracy delivers the technical efficiency required for implementation. But the recent moves in the civil service are indicative of conflicting imperatives – the notion of separation between politicians and administrators is becoming blurred by the day.

“Look at what happened to Prisons and BDF where second in command were overlooked for outsiders, and these are the people who had sacrificially served for donkey’s years hoping for a seat at the ladder’s end. The frequency of the changes, at times affecting the same Ministry or individual also demonstrates some level of ineptitude, clumsiness and lack of foresight from those in charge,” remarked the PS who added that their view is that the transfers are not related to anything but “settling scores, creating corruption opportunities and pushing out perceived dissident and former president, Ian Khama’s alleged loyalists and most of these transfers are said to be products of intelligence detection.”

Partly blaming Khama for the mess and his unwillingness to let go, the PS dismissed Masisi for falling to the trap and failing to outgrow the destructive tiff. “Khama is here to stay and the sooner Masisi comes to terms with the fact that he (Masisi) is the state President, the better. For a President to still be making these changes and transfers signals signs of a confused man who has not yet started rolling his roadmap, if at all it was ever there. I am saying this because any roadmap comes with key players and policies,” he concluded.

The Ministry of Health and Wellness seems to be the most hard-hit by the transfers, having experienced three Permanent Secretaries changes within a year and a half. Insiders say the changes have everything to do with the Ministry being the centre of COVID-19 tenders and economic opportunities. “The buck stops with the PS and no right-thinking PS can just allow glaring corruption under his watch as an accounting officer. Technocrats are generally law abiding, the pressure comes with politically appointed leaders racing against political terms to loot,” revealed a director in the Ministry preferring anonymity.

The latest transfer of Kabelo Ebineng she says was also motivated by his firm attitude against the President’s blue-eyed Task Team boys. “The Task Team wants to own the COVID-19 pandemic and government interventions and always cry foul when the Ministry reasserts itself as mandated by law,” said the director who added that Masisi who was always caught between the crossfire decided on sacrificing Ebineng to the joy of his team as they (Task Team) were in the habit of threatening to resign citing Ebineng as the problem.

Ebineng joins the Office of the President as a deputy Coordinator (government implementation and coordination office).The incoming PS is the soft-spoken Grace Muzila, known and described by her close associates as a conformist albeit knowledgeable.

One of the losers in the grand scheme is Thato Raphaka who many had seen as the next PSP because of his experience and calm demeanour following a declaration of interest in the Southern African Development Community (SADC) Secretary post by the current PSP, Elias Magosi.

But hardly ten months into his post, Raphaka has been transferred out to the National Strategy Office in what many see as a demotion of some sort. Other notable changes coming into OP are Pearl Ramokoka formerly with the Employment, Labour and Productivity Ministry coming in as a Permanent Secretary and Kgomotso Abi as director of Public Service Reforms.

One of the ousted senior officers in the Office of the President warned that there are no signs that the changes and transfers will stop anytime soon: “If you are observant you would have long noticed that the changes don’t only affect senior officers but government decisions as well. A decision is made today and the government backtracks on it within a week. Not only that, the President says this today, and his deputy denies it the following day in Parliament,” he warned.

Some observers have blamed the turmoil in the civil service partly to lack of accountable presidential advisers or kitchen cabinet properly schooled on matters of statecraft. They point out that politicians or those peripheral to them should refrain from hampering the technical and organizational activities of public managers – or else the party (reshuffling) won’t stop.

In the view expressed by some Permanent Secretaries, Elias Magosi, has not really been himself since joining the civil service; and has cut a picture of indifference in most critical engagements; the most notable been a permanent secretaries platform which he chairs. As things stand there is need to reconcile the imperatives of democracy and democracy in Botswana. Peace will rein only when public value should stand astride the fault that runs between politicians and public managers.

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Morupisi fights for freedom in court

19th April 2021
morupisi

Former Permanent Secretary to the President, Carter Morupisi, is fighting for survival in a matter in which the State has charged him and his wife, Pinnie Morupisi, with corruption and money laundering.

Morupisi has joined a list of prominent figures that served in the previous administration and who have been accused of corruption during their tenure in office. While others have been emerging victorious, Morupisi is yet to find that luck. The High Court recently dismissed his no case to answer application.

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Pressure mounts on Biden to suspend Covid-19 vaccine patents

19th April 2021
Joe Biden

United States President, Joe Biden, is faced with a decision to make relating to the Covid-19 vaccine intellectual property after 175 former world leaders and Nobel laurates joined the campaign urging the US to take “urgent action” to suspend intellectual property rights for Covid-19 vaccines to help boost global inoculation rates.

According to the world leaders, doing so would allow developing countries to make their own copies of the vaccines that have been developed by pharmaceutical companies without fear of being sued for intellectual property infringements.

“A WTO waiver is a vital and necessary step to bringing an end to this pandemic. It must be combined with ensuring vaccine know-how and technology is shared openly,” the signatories, comprising more than 100 Nobel prize-winners and over 70 former world leaders, wrote in a letter to US President Joe Biden, according to Financial Times.

A measure to allow countries to temporarily override patent rights for Covid related medical products was proposed at the World Trade Organization by India and South Africa in October, and has since been backed by nearly 60 countries.

Former leaders who signed the letter included Gordon Brown, former UK Prime Minister; François Hollande, former French President; Mikhail Gorbachev, former President of the USSR; and Yves Leterme, former Belgian Prime Minister.

In their official communication, South Africa and India said: “As new diagnostics, therapeutics and vaccines for Covid-19 are developed, there are significant concerns [about] how these will be made available promptly, in sufficient quantities and at affordable prices to meet global demand.”

While developed countries have been able to secure enough vaccine to inoculate their citizens, developing countries such as Botswana are struggling to source enough to swiftly vaccine their citizens, something which world leaders believe it would work against global recovery therefore proving counter-productive.

Since the availability of vaccines, Botswana has been able to secure only 60 000 doses of vaccines, 30 000 as donation as from the Indian government, while the other 30 000 was sourced through COVAX facility.  Canada, has pre-ordered vaccines in surplus and it will be able to vaccinate each of its citizens six times over. In the UK and US, it is four vaccines per person; and two each in the EU and Australia.

For vaccines produced in Europe, developing countries are forced to pay double what European countries are paying, making it more expensive for already financially struggling economies.  European countries however justify the price of vaccines and that they deserve to buy them cheap since they contributed in their development.

It is evident that vaccines cannot be made available immediately to all countries worldwide with wealthy economies being the only success story in that regard, something that has been referred to as a “catastrophic moral failure”, head of the World Health Organisation (WHO), Tedros Adhanom Ghebreyesus.

The challenge facing developing countries is not only the price, but also the capacity of vaccine manufactures to be able to do so to meet global demand within a short time. The proposal for a patent waiver by India and South Africa has been rejected by developed countries, known for hosting the world leading pharmaceutical companies such US, European Union, the United Kingdom, and Switzerland.

According to the Financial Times, US business groups including pharmaceutical industry representatives, have urged Biden to resist supporting a waiver to IP rules at the WTO, arguing that the proposal led by India and South Africa was too “vague” and “broad”.

The individuals who signed the letter, including Nobel laureates in economics as well as from across the arts and sciences, warned that inequitable vaccine access would impact the global economy and prevent it from recovering.

“The world saw unprecedented development of safe and effective vaccines, in major part thanks to US public investment,” the group wrote. “We all welcome that vaccination rollout in the US and many wealthier countries is bringing hope to their citizens.”

“Yet for the majority of the world that same hope is yet to be seen. New waves of suffering are now rising across the globe. Our global economy cannot rebuild if it remains vulnerable to this virus.”
The group warned that fully enforcing IP was “self-defeating for the US” as it hindered global vaccination efforts. “Given artificial global supply shortages, the US economy already risks losing $1.3tn in gross domestic product this year.”

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