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The 2019/2020 Budget Speech Fiscal Legislation Proposals

TUMELO RANNAU

On Monday 4th February 2019, the Minister of Finance and Economic Development (the Minister) presented the budget speech and proposed some changes to the fiscal legislation specifically the Capital Transfer Tax (CTT) Act.

For the purposes of this article we shall use the phrase “donations tax” to represent Capital Transfer Tax for ease of understanding. Donations tax is a tax charged on the recipient of a donation of any property, be it money, shares, movable goods and immovable property. The donation could happen during the donor’s lifetime or as an inheritance. The tax is charged at 5% at the highest bracket, i.e. for amounts in excess of P 500 000 in value.

The proposed changes will ensure that heirs enjoy full exemption from inheritance of household goods and personal belongings. Currently the exemption of donations tax in relation to inheritance of household goods is limited to P15, 000 of the aggregate value of inherited household goods received in a tax year (1st July to 30th June for individuals and financial year for companies). Therefore currently, if one inherits say P10, 000 worth of household goods from their uncle and P6, 000 from the grandfather, only P1, 000 (being P 16 000 less P 15 000) will be subject to donations tax.

The exemption doesn’t apply to a single donation but the aggregate donations in a tax year. Additionally, the exemption threshold of casual gifts shall be increased from an aggregate value of P5, 000 to P25, 000. Therefore if one receives P26, 000 worth of casual gifts from various sources, only P1, 000 will be subject to donations tax.

The proposed amendments will also ensure that all immoveable property exempt in terms of the Transfer Duty Act will be exempt from donations tax. It should be noted that these will include the proposed amendments as per the Transfer Duty Amendment bill to be re-tabled in March 2019. The following exemptions are contemplated in terms of the proposed Transfer Duty Amendment bill:

Transfer of property to one spouse after death or divorce
Transfer of property to another spouse or company owned by spouse where they are married in community of property
Donation of immoveable property to eligible beneficiaries in the Income Tax Act. They include donations to destitute people, institutions such as SOS, etc.
Transfer of property to heirs in terms of a will or otherwise
Transfer of property to a trust for support of a marriage by parents of spouses or the spouses (includes intended spouses)
Partitioning of property that is jointly owned

Under the Transfer Duty Act the exemption on the above situations can only be enjoyed when the properties are transferred for free without any payment. Where there is a payment involved there is no exemption for Transfer Duty. It should be noted that exemption under these circumstances is not automatic and therefore an application has to be lodged with the Commissioner General detailing the type of exemption sought. It is expected that where an exemption certificate is issued under the Transfer Duty Act it will automatically cover exemption under the Capital Transfer Tax Act for those who are eligible for both.

The civic society organizations including religious organizations are advised to take advantage of these proposed exemptions and lobby for automatic exemption as currently only associations recommended for exemption by the Minister enjoy this. This is normally sought by application to the Minister.

Prior to the amendment of the Second Schedule to the Income Tax Act (in July 2004), these organizations used to enjoy exemption from donations tax when they were under Part 1 of the schedule. After being moved to Part II of the schedule they lost this exemption. In terms of lobbying, organizations such as political parties and unions are the only ones that enjoy these exemptions from donations tax as they are in Part I.

Part I of the Income Tax Act deals with exempt persons, that is, entities or individuals exempt from Income Tax and Part II deals with exempt income, that is, source of income that is exempt from Income Tax. Persons exempted from income tax do not submit income tax returns while persons whose income is exempt from income tax are required to submit returns and pay donations tax. Therefore contrary to popular belief that civic society organizations are tax exempt, they are required to register for tax and file income tax returns and pay donations tax.

Writes in personal capacity

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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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