The state-owned revenue and tax collection entity Botswana Revenue Unified Service (BURS) is experiencing difficulties in collecting tax from companies and other tax payers, a development which could result with government losing substantial revenues needed to fund public projects.
This emerged in BURS’s latest annual report tabled in parliament last week.
According to statistics from the report BURS is owed P2 235 581 149, which comprised P1 235 288 674 Value Added Tax (VAT) and P1 018 56, 426 Assessed Income Tax and bulk of the arrears are charges for late payment of tax and late filing of returns. Out of the over P2 billion owed, P1 421 192 867 (around P1.4 billion) represents arrears which accrued due to interest on overdue payment and penalties for tax defaulting. “The outstanding balance indicates that the interest and penalties account for 64 percent of the arrears whilst the principal tax outstanding is 36 percent,” states the report in part.
The report shows that in 2016 BURS could not recover VAT amounting to P38 510 294 and P52 103 599 of charges which accumulated as interest and penalty charges for failure to settle the VAT; the organization also failed to recover assessed tax amounting to P79 270 806 and P101631 695 which accumulated as interest which accrued on unpaid income tax. Consequently, the revenue collecting agency lost a total of P271 516 394 (around P271 million) recorded as money which could not be recovered due to discharges, remissions, waivers and adjustments on VAT and assessed tax.
“The existence of tax arrears presents a major challenge as a significant proportion of the arrears are very old and difficult to collect as some of the debtors cannot be traced. Previous attempts to recover the outstanding debt have been beset by a number of challenges including untraceable debtors, unavailable supporting records and taxpayers’ inability to pay. As a result, there may be a need to consider a blanket write off of debts over 5 years of age,” said BURS Commissioner General Ken Morris. He indicated that in its bid to improve tax payment and recovery of unsettled tax payments 494 tax payers were detained while 425 seizures were made. According to BURS goods seized during the year were mainly cigarettes, vehicles, assorted clothing materials, agricultural products and household products.
BURS Board Chairperson Dr Taufila Nyamadzabo has raised concern that they still faces manpower constraints which make them unable to carry out adequate enforcement activities to further maximize revenue. He however stated that the situation is expected to improve as BURS decided that during the current financial year, the entity will prioritize the utilization of e-service as a major strategic objective of enhancing service delivery. According to Nyamadzabo, the final phase of the e-service project which entailed the introduction of online filing of corporate and individual tax returns was successfully completed last year, resulting with increase in tax payers who are able to file their tax returns online. “This should have a positive result in freeing staff resources to devote more time to other equally important activities such as tax payer education and improving compliance. In addition, BURS expects to implement pay structure which will improve the organization’s competitiveness to attract and retain skilled tax administration professionals,” said the economist.
According to BURS, the proportion of tax revenue to Gross Domestic Production (GDP) slightly decreased from 23.6 percent to 23.5 percent last year and revenue collected declined by 5.75 percent from P37.489 billion recorded in 2015 to P34.694 billion in 2016. Revenue collected during the year was also 70 percent lower than the strategic plan target of P37.9 billion. The decline in revenue collection is attributable to income tax which fell from P15.884 billion recorded in 2015 to P13.832 billion collected last year. VAT also contributed to the decrease in collected revenues, after falling from P5.907 billion to P5.685 billion in 2016.