Max Lucade once said â€œConflict is inevitable, but combat is optionalâ€. Just like in any relationship whether romantic, friendship or industrial related, taxpayers and tax authorities often get into disputes.
Most of the tax disputes are as a result of differing opinions on the tax treatment of some items especially whether they should be allowable (or deductible) or not and there are cases where the disputes arise because of alleged wrong doing by taxpayers such as fraud and evasion. Disputes can be minimized through various means, among those are the use of rulings from the tax authority, though there is no legislation on rulings currently taxpayers can approach Botswana Unified Revenue Service (BURS) Technical Division to get their views on transactions the business is about to undertake to provide their technical understanding and administrative procedure.
This will be helpful to both the taxpayer and BURS as it may avoid incurring additional costs such as legal fees, additional tax liabilities and other resources that can be channeled towards other business ventures or revenue collection exercise. But most importantly taxpayers should ensure that whatever they are supposed to pay or file is done on time to avoid unnecessary tax liabilities and avoid any wrong doing on their side.
Risk management departments of taxpayers should include managing tax risks especially in the rising demands for revenue collection and for high net worth individuals they should also ensure they have tax risk management policies in place as a preventative measure for tax disputes. The recently introduced Transfer Pricing legislation has a provision for Advanced Pricing Agreements (APAs) which is a mechanism that allows taxpayers to enter into agreement on Transfer Pricing methods to be used by the taxpayer.
This mechanism reduces chances of TP disputes arising because of disagreements in the applicable Transfer Pricing methods and saves costs such as legal costs and additional tax liabilities. Despite having done the above to avoid disputes with BURS, they may still issue additional tax assessments especially where there are no agreements or rulings in place. Where the taxpayer does not agree to this assessment they are allowed to object to the amount raised by BURS.
It is during this stage that both the taxpayer and BURS can get into negotiations for a win-win outcome arising out of the dispute if they do not want to go to the next stage which is appealing to the board of adjudicators. Just like in APAs negotiations help in reducing additional costs to the business. Though it is not available as a legal provision it is a tool used by tax authorities worldwide to settle disputes. In countries that have Tax Administration Acts (TAA), issues such as negotiations and rulings are covered in that Act.
Former Minister of Finance has previously hinted that Botswana will soon have a TAA and its being drafted. This will bring efficiency for both taxpayers and BURS in terms of dispute resolution and other administrative aspects. It is important that the drafting of objections involve tax professionals for accurate technical interpretation of applicable laws and application of their experience including case law for the objections to be effective. Where negotiations do not work the next stage is appealing to the Board of Adjudicators (BoA) which is more of a tribunal. Where the decisions that are taken by the BoA are still not satisfactory taxpayers can appeal to the High Court up until the Court of Appeal. It is also advisable to include tax professionals at this stage to make the arguments strong and efficient.
The combination of tax and legal experts will ensure client have both aspects that are critical in tax cases; strong technical application and legal arguments. In conclusion letâ€™s all be like that wise man who said â€œConflict is neither good nor bad. Properly managed, it is absolutely vitalâ€, letâ€™s manage those before they cause us more problems.
Bertrand Russell once said, “What men want is not knowledge, but certainty”. This quote resonates with a lot of investors and businesses in terms of trade facilitation and ease of doing business. Some business laws or transactions will not always be clear to all concerned stakeholders and therefore use of rulings may be necessary to put things into perspective.
The world over, tax administrations are adopting the use of advanced binding rulings (“ABR”) to ease the burden of compliance for taxpayers. Some companies in the country especially in the manufacturing industry import raw materials from outside and depending on where they were bought may be subject to Customs Duty.
There may be some goods with debatable classifications where the taxpayer and Customs administrator have different views on how it should be classified and consequently valued. To solve these kind of problems, the 2018 Customs Duty Act (the Act) introduced the concept of ABR and taxpayers can now request for an ABR from BURS.
The Act defines an ABR as “a written decision provided by Commissioner General to an applicant prior to importation of goods covered by the applicant that sets forth the treatment that shall be provided to the goods at the time of importation, based upon the facts presented by the applicant”. Even though the definition of ABR seems to limit ABRs to importation only, the Act states that an importer, exporter or any interested person may apply to the Commissioner General and be issued with an ABR.
The Act provides for various aspects to be included in the ABR; these are tariff classification of goods, origin of goods, customs valuation, duty exemption, drawback, quotas or fees and any other matters that may be prescribed by the ruling. Apart from providing the taxpayer with certainty, ABRs are time saving as they expedite the process of customs clearance since other steps such as goods classification and valuation would have been dealt with through the agreement.
The OECD lists ABR systems among the most impactful single trade facilitation measures with potential average cost reduction of 6%. This was therefore a good introduction and contributes to ease of doing business in the country. ABRs also ensures that there is consistency in classification of goods by Customs officials. This does not only benefit taxpayers but Customs administrations as they have advance knowledge of future importations which is useful for risk management purposes. Risk management has become an important aspect of tax administration and this is a good move towards attaining efficiency in tax collection.
The ABR entered into by the taxpayer and BURS can be valid for up to 3 years depending on the agreed validity period between the 2 parties and shall be binding to both parties. No ABR may be issued in relation to current or completed customs transactions, that is, ABRs only apply to customs transactions occurring after the ruling has been issued and specifically included in the agreement. ABRs also do not cover appealed decisions on matters before the courts of law. Where there are material changes to local or international laws regarding the contents of the ruling, the ruling shall cease to be valid and the taxpayer may seek a new one. Taxpayers who are affected by a lot of customs procedures and face uncertainties in terms of goods classification and valuation are encouraged to take advantage of this provision for business efficiency.
A returning resident of Botswana and natural persons changing residence to Botswana for whatever reasons upon satisfying immigration requirements are entitled to duty free of goods upon entry into the country. Reason of change of residence may be employment, investment, joining family or returning after long absence from the country.
Customs Act of 2018 Section 234(1) “returning resident shall be authorized to re-import, free of duties and taxes, his or her personal effects and means of transport for private use, which were in free circulation in Botswana, if the goods have not undergone any manufacturing, processing or repairs while abroad other than maintenance in connection with their use abroad”
(2) “The Revenue Service may, where necessary, require proof that the personal effects and means of transport for private use were owned and used in Botswana by the returning resident under subsection (1) prior to his or her departure”.
Tariff book volume II rebate 407.06 Household effects and other articles for own use and 407.06/00.00/01.00/05 household furniture , other household effects and other removable articles, including equipment necessary for the exercise of the calling, trade or profession of the person, other than industrial, commercial or agricultural plant and excluding motor vehicle, alcohol beverages and tobacco goods the bona fide property of a natural person(including a returning resident of Botswana after an absence of 6 months or more) and members of his or her family, imported for own use on change of his her residence to Botswana : provided these goods are not disposed of within a period of 6 months from the date of entry.
In addition Tariff book volume II rebate 407.04 Motor vehicles imported by natural persons on change of permanent residence and 407.04/87.00/01.02/20 states the one is allowed to import duty free one motor vehicle per family, imported by natural persons for his or her personal or own use, who permanently changes his or her residence to Botswana and
Provided the vehicle so imported is the personal property of the importer and has personal property of the importer and has personally been used by him or her
For a period of not less than 12 months prior to his or her departure to Botswana (FULL DUTY REBATE) or;
For a period of less than 12 months prior to his or her departure to Botswana (PRO RATA)
In the case of approved intended residents arriving from an African country, is owned and used for such shorter period as the Commissioner General may in exceptional circumstances decided and
Provided the vehicle is not offered, advertised, lent, hired, leased, pledged, given away, exchanged, sold or otherwise disposed of within a period of 20 months from the date of entry.
The returning resident or natural persons changing residence, entering Botswana are expected to engage a clearing agent who will manage her/his paper work clearance. The clearing agent will charge a service fee and submit a declaration to customs official.
When the customs official is satisfied that the client is qualifying as per the above requirements the officer will issue authenticated Rebate certificate101 which will be used to waive duties.
The Human Immunodeficiency Virus (HIV) was first detected in Botswana in 1985. The coronavirus that causes Covid-19 was detected in 2020. Both viruses were new, and it was their global occurrence that led to their classification as pandemics.
They have both been traced to animals, something not surprising as most new viruses are actually cross-overs from animals. A virus crosses species, in this case to humans, and its subsequent behaviour depends on how it adapts to the new species. Many are “dead-ends”, the virus cannot multiply or be transmitted between members of the new species.
In the case of the two which are our subject in this paper, the viruses adapted to the new species (human) and underwent mutations that allowed them to be easily transmitted between humans, hence the rapid spread.
The two viruses, HIV and the Covid-19 virus are very different, hence their mode of spread is different and their mechanisms of disease causation and epidemiology are very different. The approach to their control is of necessity very different. To illustrate their difference, HIV is transmitted mainly by sexual intercourse, Covid-19 virus mainly by the droplet method through the respiratory tract.
HIV causes ill health a long time after infection, which can run from about two years to many years (incubation period); the incubation period of Covid-19 is a few days, estimated at between 10 and 14 days. HIV infection leads to the destruction of the immune system, and when the victim gets ill, it can be from any of a wide variety of diseases caused by “opportunistic infections or even cancers”, hence the name Acquired Human Immunodeficiency Syndrome (AIDS).
Covid-19 on the other hand presents generally as an upper respiratory tract infection (URTI) although there are some presenting differently, especially with lower respiratory infection (lungs affected) in the more severe cases. Another but very important difference is that, while Covid-19 is generally an acute, self-limiting illness, with most patients recovering fully within a few weeks, and in fact many showing no symptoms, HIV/AIDS is a chronic condition; once the patient starts signs and symptoms, usually years after infection, this leads invariably to death from one of the opportunistic infections or diseases.
This last scenario used to be the case in the first decades of HIV/AIDS, but has fortunately changed after the development of drugs that in combination are referred to as Highly Active Anti-Retroviral Therapy (HAART, now known as ART).
HIV/AIDS is now treatable and no longer a death sentence, although treatment lasts for life as the drugs do not eliminate the virus from the body but suppress it. As for Covid-19, there is currently, as is the case generally with viral infections, no effective antibiotic or antiviral drug that kills the virus or eliminates it from the body.
Where does this put us? We are essentially dealing with two diseases or pandemics that are very different from each other. I did my post-graduate studies in Public Health during the last years of smallpox eradication, actually I finished the studies in 1978, the year Smallpox eradication was certified in Botswana.
What used to be emphasized, why the world succeeded in eradicating Smallpox was that it had epidemiological characteristics that supported eradication: it was easy to diagnose, even by lay people; it had a consistent incubation period of about 10 days; it virtually had a 100% manifestation rate (everybody infected showed typical signs and symptoms); there was a vaccine against it that was virtually 100% effective. Unfortunately, there have been few diseases with such favourable characteristics for eradication. Hence the next disease targeted for eradication, Polio, is almost done but still causing some problems.
Response to the HIV/AIDS and Covid-19 pandemics in Botswana
When HIV was detected in Botswana in 1985, the world had been aware of the existence of AIDS for about five years, that is, since the outbreaks among gays in America in 1981. By 1985 the virus had been identified but little was known about it; it was still a subject of intense research. However we knew that it caused AIDS and was no longer just transmitted in gay sex, but that most transmission in Africa was through heterosexual sex, and that sexual transmission was responsible for more than 90% of transmission occurring in Africa.
Some African countries were already experiencing severe HIV/AIDS epidemics, especially in Central and East Africa. In some of them (Uganda is sometimes quoted) people started dying in large numbers before the cause was known, only for people to move to neighbouring villages and infect others there!
The Botswana HIV epidemic, as well as those of SACU countries generally, was later than those of Central and East Africa. The latter had already experienced high disease and mortality rates for some years. In the late 1980s, Botswana was experiencing a big economic boom, and this attracted professionals, technicians and artisans from African countries badly affected by HIV/AIDS, and this really speeded up transmission in the country.
When the first seropositive people were identified in 1985, I was Assistant Director of Health Services responsible for Primary Health Care. So, Disease Control fell in my Department, and I had the responsibility of reporting to my seniors at the Ministry and hence to the country that we now had HIV.
Control measures were started immediately, such as screening all blood donated for transfusion and putting together with the help of WHO, the first short-term control plan. A unit was created which was headed by an appropriate professional. In 1986 I became Director of Health Services and Deputy Permanent Secretary, and in January 1990 I became Permanent Secretary.
In all these positions I was intimately involved in HIV/AIDS control, working intimately with those directly responsible for the unit/programme, and also doing at least one assignment with Global Programme on AIDS (GPA) when it was still with WHO before UNAIDS was created to share the AIDS programme with other UN Agencies. In the same manner, here at home we started pushing for the multisectoral approach to HIV/AIDS control in the early 1990s, that resulted in the formation of the National AIDS Council and eventually NACA.
The Ministry of Health undertook a very intensive public education from early in the HIV epidemic. The Ministry warned the people of Botswana (through and including the political, traditional and community leaders) about what was going to happen, the impending doom of high morbidity and mortality. What was needed was change is sexual behaviour.
Everyone knows that the main message from the Ministry was “ABC” (abstain, be faithful, condomise), which had become a universal message especially in Africa was used by the Ministry. Put in other words, the message aimed at three things; i) delaying sexual debut, ii) avoiding multiple concurrent partners and iii) consistent condom use.
This message never made an impact on the Botswana population, so when the clinical cases started hitting the country after the several years of silent spread (the silent phase of HIV spread), the effect was disaster. We had a nasty surprise in the health system that while the countries in central Africa that had early HIV/AIDS epidemics had their HIV prevalence plateauing at 15% and we thought the same would happen here, in Botswana and Southern Africa prevalence rates went past 30%.
This was due partly to the sexual practices of our people but also to the HIV sub-type that was prevalent in our part of the world. By 1966 Botswana was declared as having the highest prevalence of HIV in the world.
The real heavy load of cases in Botswana started in the mid-1990s, and everybody remembers it; funerals and funerals and funerals. That time ARVs were still under development, and it was only at the end of the 1990s that they became available but very expensive, so most poor and middle income countries could not immediately afford them.
Thanks to India, Thailand and Brazil who broke the patents and manufactured the drugs, their availability to many developing countries would have taken a long time. Here in Botswana, it was due to the initiative of the then President that HAART became available for general use in Government facilities in 2002, with massive aid from PEPFAR and ACHAP (supplied by Merck Foundation and the Bill and Gates Foundation).
Otherwise there was talk of extinction, and the expected population pyramid produced by UNAIDS was frightening. Luckily because of ARV’s that scenario did not occur. The rest of Botswana’s HIV/AIDS trajectory up to now is history. I left Government service on 31st December 1996 after seven years as P.S. and joined WHO.
I had almost joined WHO in 1989 but deferred it when I was appointed PS and did not want to appear unpatriotic and disappoint President Masire and PSP Legwaila with both of whom I had very excellent relations. My initial job with WHO was in Tuberculosis, a disease that had been my passion since I did Public Health and took over its control as head of disease control in 1979.
No matter what post I held in the Ministry thereafter, I participated directly in Tuberculosis control. And as we all know. Tuberculosis became and is still one of the manifestations of HIV globally and in Botswana.
HIV/AIDS was and is a slow epidemic. So, the public did not really perceive it as a threat in Botswana, except perhaps in the late 1990s and early 2000s when it caused very high mortality in the country. The Covid-19 epidemic/pandemic is different. Although it doesn’t kill everybody who gets it like HIV-related disease did, we have seen in highly affected countries that the 2-5% it kills translate to large numbers, because this is an acute infection that spreads very quickly. So, it should be easy for the public to perceive its danger.
The surveillance and containment that has been employed so far in Botswana to control the spread of Covid-19 has been very effective. Those responsible, the Ministry of Health and Wellness and the Task Force deserve to be acknowledged and thanked for a job well done. I am confident that the health care system can also adjust itself and not be disrupted by this new threat.
Since the chances of developing a drug against such a virus seems a bit remote, we are all putting our hope on a vaccine. Many viral diseases have very effective vaccines, so this keeps our hope up. We also need to know if one attack of this disease results in life-long immunity (like measles, mumps, chicken pox etc.) or if one can be attacked more than once, implying that the virus keeps mutating and bringing up new sub-types.
We are still to see if the public will do better than they did with HIV/AIDS and follow the health education. Experience is what usually persuades people to change; that is why many believe the celebrated change in Uganda when people changed and HIV infections dropped was due to the large mortality they had experienced before they even knew what was killing them.
Regarding Covid-19, we are seeing in a number of badly affected countries, people ignoring or resisting social distancing measures and masks, sometimes encouraged by politicians! Here in Botswana we have not yet experienced large losses of lives from Covid-19, so it is still to be seen how the public will really conform to advice, especially on social distancing and other measures like masks and hand washing.
What one sees so far is not very encouraging -in combis, bars etc., and during weekends in homes. In health we talk of KAP (Knowledge, Attitude, Practice). We know that K does not always lead to change in A, and to P. We saw this plainly in HIV/AIDS, what is going to happen in Covid-19?