Covid-19 continues to have impact on businesses and individuals alike, while some employees may lose their jobs and businesses be forced to shut down and never recover from the pandemic, both have some commitments towards other businesses that they might not have settled yet.
These unsettled commitments by customers are sometimes referred to as bad debts, it is inevitable that there will be some bad debts arising from the pandemic and businesses should start providing for such.
From an Income Tax perspective these are allowable as per section 41 (1h) bad debts which have been recognized in the book of accounts for any business are allowable as a deduction to determine taxable income.
This recognizes the fact that the debts were initially recorded as income accruing to the business and therefore an adjustment should be made to ensure that the income is not overstated. Where the business uses the cash basis of accounting instead of the accrual method the bad debt will not an allowable deduction as it was not recognized in the books of accounts as income.
It should be noted that these should be specific amounts of bad debts and not a thumb suck or general provision done by the taxpayer. Where a general provision is done by the taxpayer the provision will be an add back for tax purposes and therefore be an increase in taxable income. When providing for the bad debt or writing it off the books of accounts the taxpayer should be able to show that there were reasonable steps taken to recover the debt.
Such steps range from email or letter follow-ups, legal action taken against such customer or there is proof of insolvency of the debtor. In the context of Covid19 debtors who have lost their income earning capacity the latter may be the information required by the tax authority in relation to audits or information requests.
These should form part of documentation that is prescribed to be kept for a minimum of 8 years. The burden of proof always lies with the taxpayer and it is therefore important that you can substantiate the amount of bad debts written off. It should be noted that in terms of Section 28 (2 c ii) if these are recovered by the business after they were written off, they should be recognized as income.
From a Value Added Tax (VAT) perspective where such bad is recognized input VAT should be claimed as per section 21(9) of the VAT Act. The input tax can be claimed on the latter of the date which it was written off or a year after VAT relating to the debt was paid. Same requirements of proving the debt was irrecoverable by the taxpayer are the same as discussed above for income tax purposes.
It is also important to issue credit notes in relation to the debt and give it to the customer where possible. Credit notes and related information will help the taxpayer substantiate the input tax deduction when quizzed by BURS. It is also worth mentioning that where there is no credit note BURS may disallow the input tax deduction as the credit note works as evidence that you have no hope pf recovering the debt. The credit note should also comply to a valid tax invoice particulars and should bare same description as in the invoice or supply that is being reversed because of the bad debt.
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.
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.
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.