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Why Should Pension Income Be Taxable?

Kesitegile Gobotswang (PhD)
BCP Deputy Leader

It is common knowledge that all living people will pass on in the future. In anticipation of this eventuality it is not uncommon for people to enrol in funeral schemes to ensure that when death eventually strikes, together with their beneficiaries they are accorded a decent burial.

Even low income earners such as people in the informal sector as well as peasant farmers are members of burial societies. Group funeral schemes are not uncommon among religious organizations.  Botswana Congress Party (BCP) may be the first political organization to introduce a group funeral scheme entitled “KGOLOLO Funeral Scheme” which was recently launched at the annual party conference in Francistown.

What is also a fact of life is that people progress from young to old age over time. Working people eventually become economically inactive. Unfortunately many fail to plan for the time when they are no longer economically active.  The absence of progressive pension legislation compounds the problem.   In the public service and state owned enterprises in particular, many employees are on a permanent and pensionable condition of service. For this reason a significant number of citizens will reach retirement age and live on a monthly pension income.

Employees who are pensionable pay income tax that is deducted from their basic salary. What they will realize upon retirement is that they will pay income tax if their annual income exceeds the P30 000 threshold. Tax rate increases with an increase in income reaching 25% of income earned.  This is tantamount to double taxation which is unfair. The main reason why pension is taxable is because it is treated as income earned disregarding how the income was earned.  In other words being a pensioner is an employment status.

The issue of taxation among pensioners should be of interest to every working person who is on permanent and pensionable employment.  Those who are already feeling the injustice of having to pay income tax from their hard earned pension are older people already on retirement. My recent conversation with one of the pensioners who is also an active member of the Public Service Pensioners Association suggested that the issue is also a serious concern to their Association.  Apparently the Association is addressing the matter with the relevant authorities.  The Association should be commended for the effort they have undertaken to reverse the obvious injustice.  

It is an issue that should be brought before parliament in the form of an urgent amendment to the current income tax. However, this will not happen if the voice of those affected is subdued. An element of militancy is required to mount effective pressure on government. A close examination of the leadership of the Pensioners Association shows that it is dominated by former senior officials whose views are predominantly conservative and tend to remain loyal to the political status quo. They would not like to rock the boat.

Most working people in Botswana are unable to save for the future when they would no longer be economically active. Maintaining quality of life among older people remains a challenge to many upon retirement. In future it is desirable to come up with a system that encourages all working people to be on pension. During the 10th Parliament Members of Parliament in their wisdom passed a motion to introduce a universal and mandatory pension scheme. The motion was presented by Hon Dumelang Saleshando former Member of Parliament for Gaborone Central and President of the BCP.

Subsequently the relevant ministry made a commitment to implement a broad-based occupational pension scheme during NDP 10. The then Permanent Secretary in the Ministry of Labour and Home Affairs promised “… work on time frame not pipelines.” Unfortunately government has failed to live up to its promise to implement such an important initiative that will go a long way in addressing poverty among older people. According to the mover of the motion working persons on short term employment would enrol on a pension program and be allowed to freeze it if employment comes to an end only to revive it when they are engaged again until they reach retirement age of 60 or 65 years of age.

Under the current situation not all workers are on pension, a scenario that puts them at a disadvantage upon reaching retirement age.  It is a system that impoverishes retired people. Many find themselves without regular income soon after retirement to the extent of competing for Ipelegeng “jobs.” Universal pension scheme was intended to address these challenges. Many Batswana were shocked to learn that until recently former BCL miners were not pensionable. A universal pension system would have compelled the mine to contribute towards the pensions of their employees.  This could have minimised the negative effect of the ruthless and abrupt closer of the BCL mine.

In addition to paying income tax, pensioners pay value added tax (VAT) like the general consumers.  Interestingly pensioners in other countries pay subsidised transport fares to avoid the erosion of their pensions.  They are often provided with special identity card to distinguish them from the general public.  This applies to people with disabilities. Why should Batswana pay income tax from their hard earned pension income? The less we talk about how tax paid by retired citizens is allowed to go to waste through official corruption the better.

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Is COVID-19 Flogging an Already Dead Economic Horse?

9th September 2020

The Central Bank has by way of its Monetary Policy Statement informed us that the Botswana economy is likely to contract by 8.9 percent over the course of the year 2020.

The IMF paints an even gloomier picture – a shrinkage of the order of 9.6 percent.  That translates to just under $2 billion hived off from the overall economic yield given our average GDP of roughly $18 billion a year. In Pula terms, this is about P23 billion less goods and services produced in the country and you and I have a good guess as to what such a sum can do in terms of job creation and sustainability, boosting tax revenue, succouring both recurrent and development expenditure, and on the whole keeping our teeny-weeny economy in relatively good nick.

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Union of Blue Bloods

9th September 2020

Joseph’s and Judah’s family lines conjoin to produce lineal seed

Just to recap, General Atiku, the Israelites were not headed for uncharted territory. The Promised Land teemed with Canaanites, Hittites, Amorites, Perizzites, Hivites, and Jebusites. These nations were not simply going to cut and run when they saw columns of battle-ready Israelites approach: they were going to fight to the death.

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Security Sector Private Bills: What are they about?

9th September 2020

Parliament has begun debates on three related Private Members Bills on the conditions of service of members of the Security Sector.

The Bills are Prisons (Amendment) Bill, 2019, Police (Amendment) Bill, 2019 and Botswana Defence Force (Amendment) Bill, 2019. The Bills seek to amend the three statutes so that officers are placed on full salaries when on interdictions or suspensions whilst facing disciplinary boards or courts of law.

In terms of the Public Service Act, 2008 which took effect in 2010, civil servants who are indicted are paid full salary and not a portion of their emolument. Section 35(3) of the Act specifically provides that “An employee’s salary shall not be withheld during the period of his or her suspension”.

However, when parliament reformed the public service law to allow civil servants to unionize, among other things, and extended the said protection of their salaries, the process was not completed. When the House conferred the benefit on civil servants, members of the disciplined forces were left out by not accordingly amending the laws regulating their employment.

The Bills stated above seeks to ask Parliament to also include members of the forces on the said benefit. It is unfair not to include soldiers or military officers, police officers and prison waders in the benefit. Paying an officer who is facing either external or internal charges full pay is in line with the notion of ei incumbit probation qui dicit, non qui negat or the presumption of innocence; that the burden of proof is on the one who declares, not on one who denies.

The officers facing charges, either internal disciplinary or criminal charges before the courts, must be presumed innocent until proven otherwise. Paying them a portion of their salary is penalty and therefore arbitrary. Punishment by way of loss of income or anything should come as a result of a finding on the guilt by a competent court of law, tribunal or disciplinary board.

What was the rationale behind this reform in 2008 when the Public Service Act was adopted? First it was the presumption of innocence until proven otherwise.

The presumption of innocence is the legal principle that one is considered “innocent until proven guilty”. In terms of the constitution and other laws of Botswana, the presumption of innocence is a legal right of the accused in a criminal trial, and it is an international human right under the UN’s Universal Declaration of Human Rights, Article 11.

Withholding a civil servant’s salary because they are accused of an internal disciplinary offense or a criminal offense in the courts of law, was seen as punishment before a decision by a tribunal, disciplinary board or a court of law actually finds someone culpable. Parliament in its wisdom decided that no one deserves this premature punishment.

Secondly, it was considered that people’s lives got destroyed by withholding of financial benefits during internal or judicial trials. Protection of wages is very important for any worker. Workers commit their salaries, they pay mortgages, car loans, insurances, schools fees for children and other things. When public servants were experiencing salary cuts because of interdictions, they lost their homes, cars and their children’s future.

They plummeted into instant destitution. People lost their livelihoods. Families crumbled. What was disheartening was that in many cases, these workers are ultimately exonerated by the courts or disciplinary tribunals. When they are cleared, the harm suffered is usually irreparable. Even if one is reimbursed all their dues, it is difficult to almost impossible to get one’s life back to normal.

There is a reasoning that members of the security sector should be held to very high standards of discipline and moral compass. This is true. However, other more senior public servants such as judges, permanent secretary to the President and ministers have faced suspensions, interdictions and or criminal charges in the courts but were placed on full salaries.

The yardstick against which security sector officers are held cannot be higher than the aforementioned public officials. It just wouldn’t make sense. They are in charge of the security and operate in a very sensitive area, but cannot in anyway be held to higher standards that prosecutors, magistrates, judges, ministers and even senior officials such as permanent secretaries.

Moreover, jail guards, police officers and soldiers, have unique harsh punishments which deter many of them from committing misdemeanors and serious crimes. So, the argument that if the suspension or interdiction with full pay is introduced it would open floodgates of lawlessness is illogical.

Security Sector members work in very difficult conditions. Sometimes this drives them into depression and other emotional conditions. The truth is that many seldom receive proper and adequate counseling or such related therapies. They see horrifying scenes whilst on duty. Jail guards double as hangmen/women.

Detectives attend to autopsies on cases they are dealing with. Traffic police officers are usually the first at accident scenes. Soldiers fight and kill poachers. In all these cases, their minds are troubled. They are human. These conditions also play a part in their behaviors. They are actually more deserving to be paid full salaries when they’re facing allegations of misconduct.

To withhold up to 50 percent of the police, prison workers and the military officers’ salaries during their interdiction or suspensions from work is punitive, insensitive and prejudicial as we do not do the same for other employees employed by the government.

The rest enjoy their full salaries when they are at home and it is for a good reason as no one should be made to suffer before being found blameworthy. The ruling party seems to have taken a position to negate the Bills and the collective opposition argue in the affirmative. The debate have just began and will continue next week Thursday, a day designated for Private Bills.

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