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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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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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