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Shedding off the tax haven tag: amendment of section 5(4a) of the income tax act

Botswana has been under scrutiny from organizations such as Organisation of Economic Cooperation and Development (OECD), French government and Financial Action Task Force (FATF) in relation to secrecy laws in relation to sharing information with other countries.

In its 2017 report, the FATF stated that some Acts that aim at combating financial crime including the Income Tax Act have some limitations in relation to confidentiality of information exchanged, its protection, and use of the information for the purposes it was requested for. The worry was that there may be refusal by competent authorities to provide requested information under unreasonable or unduly restrictive conditions to courts or prosecuting bodies.

This has resulted in the country being grey listed by the FATF and has been under close monitoring by the FATF in relation to the deficiencies identified in our laws. The European Union also recently listed us in countries that may be blacklisted in October 2020 if it doesn’t address identified deficiencies.

Amending of secrecy law for Income Tax purposes may have been influenced by these developments and as the deadline comes closer for compliance it is not surprising that we have such a proposal including amendment of Acts such as Botswana Unified Revenue Service Act (which is mentioned in the report as one of the Acts to be strengthened).

Though there are some exchange of information provisions in various tax agreements Botswana has, there was worry that the current section 5(4A) had some limitations. The current subsection only references subsection 4 and doesn’t mention other sections in the Act or the whole Act. The phrase “…notwithstanding subsection (4)…..” has been replaced with “notwithstanding this Act or any other written law….” This now means the tax authority will not be limited by any section in this Act or any other law to provide information to other tax authorities or any other institution that needs such information whether within or outside the country.

The provision will supplement other available protocols such as the Southern African Development Community (SADC) exchange of information protocol and Article 25 of various double taxation avoidance agreements Botswana has with different countries. Some commentators though believe that the provision might be limited as it still references section 53 which deals with tax agreements the country has with other tax jurisdictions. The worry is that it may make it difficult for non-counterparts to access information as the same provision may be used by the authority to refuse releasing of such information where the countries do not have agreements or partnership of any form.

However apart from the tax agreements Botswana has some Tax Information Exchange Agreements (TIEAs) with some countries that are not in SADC and also do not have tax agreements with. There is also a tax information exchange manual that provides guidance on how such information is provided to whoever needs it. As parliament debates the bill in the coming weeks, we can rest assured that the passing of the bill as is or with some improvements such as allowing for a provision that caters for countries without tax agreements we will be moving towards the “white list”. Botswana will indeed be shedding off the tax haven tag and complying with the FATF and EU recommendations.

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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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