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Income Tax Act Amendment: Penalties for non-compliance

TUMELO RANNAU

There are various ways that BURS encourages tax compliance; some of these methods such as penalties and interest are also used as a way of discouraging non-compliance by taxpayers.

The Act was amended to introduce a section that deals with non-compliance due to tax avoidance and transfer mispricing. The penalties that will be applicable for non-compliance will now be P10, 000 or 200% of the tax that was lost due to the avoidance or mispricing, whichever is greater. This means that if a taxpayer’s avoidance or mispricing had resulted in a tax loss of P1m, they will have to pay P3m. That is the P1m tax liability and P2m as the penalty, these are efforts by the government to deter non-compliance due to aggressive tax planning by taxpayers.

It should be noted that this penalty doesn’t include interest on tax that is outstanding which is normally more than 10o% of the tax liability. Unlike loans issued by banks and other financial institutions, the induplum rule does not apply to interest on tax. The rule states that interest should not exceed the principal amount.

Therefore taxpayers are encouraged to ensure that they conduct their affairs at arm’s length and practice tax avoidance that is within the scope of the law. Another penalty introduced is failure to comply with section 69 which deals with the provision of information to the Commissioner General (CG). Such information ranges from tax returns, books of accounts and any other information that the CG may need to assess a taxpayer.

Failure to provide such information will result in a taxpayer paying a maximum penalty of P10, 000. In relation to failure to provide transfer pricing documentation, taxpayers will be subject to a maximum penalty of P500, 000. This penalty may only be mitigated up to P250, 000 by the CG where there are negotiations between the taxpayer and the CG for recovery of the tax payable. Therefore, this means that a minimum of P250, 000 will be payable when someone fails to furnish the CG with transfer pricing documentation. As for the P10, 000 the mitigation can go up to P0 depending on the reasons advanced by the taxpayer and the assessment by the CG.

Penalties that deal with general non-compliance under section 122 such as failure to submit returns, failure to keep records in English or Setswana, and other provisions of the Income Tax Act have been increased from P1, 000 and P10 to P10, 000 and P100 respectively. The P10, 000 will be once off and P100 will apply per day during the time that the default to pay tax occurs. Taxpayers are encouraged to request for mitigation of waiver of these penalties where they have just cause or a sound business reason that resulted in the non-compliance.

Small Medium Micro Enterprises (SMMEs) can be faced with such due to various challenges that they face and are therefore highly advised to use this provision (section 129) to their advantage to avoid cash flow problems that may besiege them due to non-compliance arising from day to day challenges in their sector.

Furthermore they are advised to maintain their business records as another mitigation strategy as they don’t know what information the CG may require from them and when. Where a taxpayer does not have space, the use of e platforms such as google drive and cloud may be useful to them. Use of tax professionals in drafting pleas for mitigation of penalties may also be helpful as they deal with the matters regularly. As stated above, mitigation of penalties up to P0 does not apply to transfer pricing documentation.
Tumelo Rannau writes in personal capacity

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Chronic Joblessness: How to Help Curtail it

30th November 2020
Motswana woman

The past week or two has been a mixed grill of briefs in so far as the national employment picture is concerned. BDC just injected a further P64 million in Kromberg & Schubert, the automotive cable manufacturer and exporter, to help keep it afloat in the face of the COVID-19-engendered global economic apocalypse. The financial lifeline, which follows an earlier P36 million way back in 2017, hopefully guarantees the jobs of 2500, maybe for another year or two.

It was also reported that a bulb manufacturing company, which is two years old and is youth-led, is making waves in Selibe Phikwe. Called Bulb Word, it is the only bulb manufacturing operation in Botswana and employs 60 people. The figure is not insignificant in a town that had 5000 jobs offloaded in one fell swoop when BCL closed shop in 2016 under seemingly contrived circumstances, so that as I write, two or three buyers have submitted bids to acquire and exhume it from its stage-managed grave.

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The Era of “The Diplomat”

30th November 2020
FATED “JIHADI” JOHN

Youngest Maccabees scion Jonathan takes over after Judas and leads for 18 years

Going hand-in-glove with the politics at play in Judea in the countdown to the AD era, General Atiku, was the contention for the priesthood. You will be aware, General, that politics and religion among the Jews interlocked. If there wasn’t a formal and sovereign Jewish King, there of necessity had to be a High Priest at any given point in time.

Initially, every High Priest was from the tribe of Levi as per the stipulation of the Torah. At some stage, however, colonisers of Judah imposed their own hand-picked High Priests who were not ethnic Levites. One such High Priest was Menelaus of the tribe of Benjamin.

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Land Board appointments of party activists is political corruption

30th November 2020

Parliament has rejected a motion by Leader of Opposition (LOO) calling for the reversing of the recent appointments of ruling party activists to various Land Boards across the country. The motion also called for the appointment of young and qualified Batswana with tertiary education qualifications.

The ruling party could not allow that motion to be adopted for many reasons discussed below. Why did the LOO table this motion? Why was it negated? Why are Land Boards so important that a ruling party felt compelled to deploy its functionaries to the leadership and membership positions?

Prior to the motion, there was a LOO parliamentary question on these appointments. The Speaker threw a spanner in the works by ruling that availing a list of applicants to determine who qualified and who didn’t would violate the rights of those citizens. This has completely obliterated oversight attempts by Parliament on the matter.

How can parliament ascertain the veracity of the claim without the names of applicants? The opposition seeks to challenge this decision in court.  It would also be difficult in the future for Ministers and government officials to obey instructions by investigative Parliamentary Committees to summon evidence which include list of persons. It would be a bad precedent if the decision is not reviewed and set aside by the Business Advisory Committee or a Court of law.

Prior to independence, Dikgosi allocated land for residential and agricultural purposes. At independence, land tenures in Botswana became freehold, state land and tribal land. Before 1968, tribal land, which is land belonging to different tribes, dating back to pre-independence, was allocated and administered by Dikgosi under Customary Law. Dikgosi are currently merely ‘land overseers’, a responsibility that can be delegated. Land overseers assist the Land Boards by confirming the vacancy or availability for occupation of land applied for.

Post-independence, the country was managed through modern law and customary law, a system developed during colonialism. Land was allocated for agricultural purposes such as ploughing and grazing and most importantly for residential use. Over time some land was allocated for commercial purpose. In terms of the law, sinking of boreholes and development of wells was permitted and farmers had some rights over such developed water resources.

Land Boards were established under Section 3 of the Tribal Land Act of 1968 with the intention to improve tribal land administration. Whilst the law was enacted in 1968, Land Boards started operating around 1970 under the Ministry of Local Government and Lands which was renamed Ministry of Lands and Housing (MLH) in 1999. These statutory bodies were a mechanism to also prune the powers of Dikgosi over tribal land. Currently, land issues fall under the Ministry of Land Management, Water and Sanitation Services.

There are 12 Main Land Boards, namely Ngwato, Kgatleng, Tlokweng, Tati, Chobe, Tawana, Malete, Rolong, Ghanzi, Kgalagadi, Kweneng and Ngwaketse Land Boards.  The Tribal Land Act of 1968 as amended in 1994 provides that the Land Boards have the powers to rescind the grant of any rights to use any land, impose restrictions on land usage and facilitate any transfer or change of use of land.

Some land administration powers have been decentralized to sub land boards. The devolved powers include inter alia common law and customary law water rights and land applications, mining, evictions and dispute resolution. However, decisions can be appealed to the land board or to the Minister who is at the apex.

So, land boards are very powerful entities in the country’s local government system. Membership to these institutions is important not only because of monetary benefits of allowances but also the power of these bodies. in terms of the law, candidates for appointment to Land Boards or Subs should be residents of the tribal areas where appointments are sought, be holders of at least Junior Certificate and not actively involved in politics.  The LOO contended that ruling party activists have been appointed in the recent appointments.

He argued that worse, some had no minimum qualifications required by the law and that some are not inhabitants of the tribal or sub tribal areas where they have been appointed. It was also pointed that some people appointed are septuagenarians and that younger qualified Batswana with degrees have been rejected.

Other arguments raised by the opposition in general were that the development was not unusual. That the ruling party is used to politically motivated appointments in parastatals, civil service, diplomatic missions, specially elected councilors and Members of Parliament (MPs), Bogosi and Land Boards. Usually these positions are distributed as patronage to activists in return for their support and loyalty to the political leadership and the party.

The ruling party contended that when the Minister or the Ministry intervened and ultimately appointed the Land Boards Chairpersons, Deputies and members , he didn’t have information, as this was not information required in the application, on who was politically active and for that reason he could not have known who to not appoint on that basis. They also argued that opposition activists have been appointed to positions in the government.

The counter argument was that there was a reason for the legal requirement of exclusion of political activists and that the government ought to have mechanisms to detect those. The whole argument of “‘we didn’t know who was politically active” was frivolous. The fact is that ruling party activists have been appointed. The opposition also argued that erstwhile activists from their ranks have been recruited through positions and that a few who are serving in public offices have either been bought or hold insignificant positions which they qualified for anyway.

Whilst people should not be excluded from public positions because of their political activism, the ruling party cannot hide the fact that they have used public positions to reward activists. Exclusion of political activists may be a violation of fundamental human or constitutional rights. But, the packing of Land Boards with the ruling party activists is clear political corruption. It seeks to sow divisions in communities and administer land in a politically biased manner.

It should be expected that the ruling party officials applying for land or change of land usage etcetera will be greatly assisted. Since land is wealth, the ruling party seeks to secure resources for its members and leaders. The appointments served to reward 2019 election primary and general elections losers and other activists who have shown loyalty to the leadership and the party.

Running a country like this has divided it in a way that may be difficult to undo. The next government may decide to reset the whole system by replacing many of government agencies leadership and management in a way that is political. In fact, it would be compelled to do so to cleanse the system.

The opposition is also pondering on approaching the courts for review of the decision to appoint party functionaries and the general violation of clearly stated terms of reference. If this can be established with evidence, the courts can set aside the decision on the basis that unqualified people have been appointed.

The political activism aspect may also not be difficult to prove as some of these people are known activists who are in party structures, at least at the time of appointment, and some were recently candidates. There is a needed for civil society organizations such as trade unions and political parties to fight some of these decisions through peaceful protests and courts.

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