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Tax havens ravage Botswana, continent

BURS to tap into Tax Inspectors Without Borders

 

Botswana could soon benefit from better tax collection and audits, with the assistance of a new initiative from a OECD (Organisation for Economic Co-operation and Development) and United Nations Development Programme dubbed Tax Inspectors Without Borders (TIWB).


An initiative launched by the OECD to capacitate tax audits and collect more taxes, in developing countries, will soon cascade to Botswana tax system. Botswana Unified Revenue Services (BURS) told BusinessPost that through membership of the African Tax Administrators Forum (ATAF), the initiative will reach Botswana and her tax authorities.


Gaitsiwe Motsewabagale, ‎General Manager – Corporate Planning and Communications at BURS, said that while the tax collector was not part of the proceedings at Ethiopia this week, the initiative would possibly reach the country through engagements at ATAF.


TIWB will facilitate targeted tax audit assistance in developing countries worldwide. Tax audit experts will work alongside local officials of developing country tax administrations to help strengthen tax audit capacities, including issues concerning international tax matters, using a toolkit that sets out guidelines for establishing TIWB programmes and protecting against potential confidentiality and conflict of interest concerns.


“Going forward, a dedicated central organising unit, the TIWB Secretariat, supported by an oversight board of stakeholders, will operate as a clearing house to match the demand for auditing assistance with appropriate expertise. The Secretariat, composed of OECD and UNDP staff and based at the OECD in Paris, will facilitate full-time or periodic deployment of experts,” said OECD secretary general at the launch.


A number of pilot projects and international tax workshops are already underway, including in Albania, Ghana and Senegal. Evidence gathered from real time cases in Colombia indicate a significant increase in tax revenue, from US$3.3 million in 2011 to US$33.2 million in 2014, directly attributable to tax audit advice and guidance.


The latest annual report of the local tax authority, being the 2013 Report, states among its operational challenges, that: “There was an insufficient number of taxpayer auditors to perform adequate audits.”


Revenue collected grew by P5.5 billion (22.6 percent), from P24.37 billion in 2011/12 to P29.87 billion in 2012/13. However this growth is attributable to a massive 69 percent increase in revenues from SACU jump in SACU receipts and a 17.4 percent increase in VAT collection, while income tax actually declined by 9.7 percent.


The Tax Inspectors Without Borders (TIWB) project was launched on Monday this week at the Ethiopian meeting, of the 3rd International Conference on Financing for Development in Addis Ababa.


TIWB will facilitate targeted tax audit assistance in developing countries worldwide. Tax audit experts will work alongside local officials of developing country tax administrations to help strengthen tax audit capacities, including issues concerning international tax matters.


A number of pilot projects and international tax workshops are reported to be already underway, in among others, Albania, Ghana and Senegal, providing proof of the effectiveness of the programme.

The scaling up to other others will be rolled out with the help of the UNDP “Evidence gathered from real time cases in Colombia indicate a significant increase in tax revenue, from US$3.3 million in 2011 to US$33.2 million in 2014, thanks to tax audit advice and guidance,” read a statement from OECD.


“The challenges faced by developing countries are being acknowledged internationally and we are delighted to mobilise the best experts worldwide in a practical contribution to domestic resource mobilisation,” OECD Secretary-General Angel Gurría said during a launch event in Addis Ababa.

“The new partnership between the OECD and UNDP on Tax Inspectors Without Borders will significantly extend the global reach of existing efforts to build audit capacity while sending a strong message of international support to developing countries.”


 "Effective domestic resource mobilisation is at the core of financing for sustainable development. But efforts to raise domestic resources are often constrained by tax evasion and avoidance, and by illicit financial flows,” said UNDP Administrator Helen Clark.


“The Tax Inspectors Without Borders programme is an innovative and practical way of supporting developing countries to mobilise more domestic resources for development. With its country level presence and local knowledge, UNDP is well-placed to partner with the OECD and the best audit experts to scale-up this important work. TIWB can support countries to realise the post-2015 agenda," Helen Clark said.


However, there is some controversy with regard to some of members of the OECD, comprising 34 rich states, also being classified as tax havens. However, the OECD says members have made efforts to shed the characteristics of such tax havens.

BOTSWANA’S TAX LOSSES

According to studies done and reported by international financial intelligence organ, Global Financial Integrity, Botswana has lost an average of P8,5 billion ($856 million) annually, between 2003 and 2012, however with a market spike in the ‘recession years’ 2007, 2008 and 2009,  illicit financial outflows.

The outflows are characterised by tax evasion, trade misinvoicing in goods transactions, transfer mispricing in services and hot money flows to jurisdictions with higher interest rates or expected changes in interest rates.


This is happening in the context of Africa, as a continent, losing over $60 billion annually from illicit financial activity.


In analysing illicit financial flows (IFFs), GFI utilises sources of data and analytical methodologies that have been used by international institutions, governments, and economists for decades; the data sources and methodologies are providing information on gaps in balance of payments data and gaps in trade data.

Where recorded sources and uses of funds in balance of payments data do not match, the difference is net errors and omissions, indicating an inflow or outflow that was not recorded. Where bilateral trade data does not match – after adjusting for freight and insurance in the data of the importing country – this indicates re-invoicing of transactions between export from one country and import into another country.


Offshore tax havens spread by new computing and telecommunications, provide an unprecedented tax shelter, enabling rich citizens and corporations to escape the national tax system. Wealthy tax evaders save millions, while public services and infrastructure in their home countries, as well as on the small island havens, remain drastically underfunded.


Botswana, herself, has only recently shed its tax haven tag after easing provisions and making amendments. At the time of the OECD report to the G20 in June 2012, Botswana was among the 11 jurisdictions also comprising Brunei, Costa Rica, Guatemala, Lebanon, Liberia, Panama, Trinidad and Tobago, United Arab Emirates, Uruguay and Vanuatu, who could not move to Phase 2 because it was determined at the time of their Phase 1 reviews that critical elements necessary to achieving an effective exchange of information were not in place in their legal framework.

At the same G20 Summit, former French president Nicolas Sarkozy, called for Botswana, alongside eleven other countries, to be excluded from the international business community because the country was a tax haven that did not have a "suitable legal framework for the exchange of tax information.”


Parliament approved the amendment of the Income Tax Act in December 2012 to allow the Botswana Unified Revenue Service to exchange information for tax purposes. Additionally, the amendment of the Banking Act was presented in Parliament last year for approval. This amendment was meant to repeal strict banking secrecy provisions and to allow for banking information to be provided for the purpose of exchanging information with treaty partners.

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China’s GDP expands 3% in 2022 despite various pressures

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China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

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On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

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Investors inject capital into Tsodilo Resources Company

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Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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