A Merry Christmas with Tax Amnesty Extension

-Minister of Finance and Economic Development speaks on Tax Amnesty extension

-Tells Parliament reasons for extension

Upon its establishment in 2004, the Botswana Unified Revenue Service (BURS) inherited all taxation debts existing as at 1st April, 2004. Some of these arrears had a history of not being collectable due to a number of reasons, including; liquidated companies, non-operational entities, deceased individuals and insolvent individuals hence the implementation of the Tax Amnesty which came into effect on 1st July 2021. 

The Minister of Finance and Economic Development Peggy Serame explained that the BURS has therefore had to follow up the outstanding liabilities with a view to recovering the arrears. Some of these taxpayers requested for waiver of the interest and penalty amounts which, in many cases, had become exorbitant.

The Minister explained that between 2015 and 2019, the Ministry considered many requests for waivers to waive over P984 billion under the Income Tax Act and VAT Act. Thus, over the years, a significant number of such requests were brought to the Ministry. Considering the high volume of requests for waiver of interest and penalties that were submitted by taxpayers to the Ministry, and we decided to implement a Tax Amnesty Scheme to run from 1st July, 2021 to 31st December, 2021.

She explained that this was aimed at giving taxpayers an opportunity to normalize their tax status by paying off the outstanding principal tax in return for cancellation of interest and penalties. The Scheme is thus part of the Ministry’s efforts to encourage taxpayers, with overwhelming and unmanageable tax arrears to clear their liabilities and start from a clean slate in terms of their tax obligations. As we have previously announced, the Scheme is intended to ease the burden on all taxpayers and it thus offers a limited time incentive to put one’s tax affairs in order. This would go a long way in facilitating local businesses to get their Tax Clearance Certificates (TCC) from the Botswana Unified Revenue Service (BURS) to be able to participate in the wider economy.

To this effect Serame says the Scheme, which was expected to offer relief to taxpayers, particularly given the impact of the COVID-19 pandemic on the economy, was effected accordingly with the following key features: It is available for a limited time of 6 months commencing on 1st July 2021 and ending on the 31st December, 2021; It is available under the Income Tax Act and the Value Added Tax Act and includes tax debts in respect of: Corporate Income Tax; Personal Income Tax; Pay As You Earn; Other Withholding Taxes; and Value Added Tax (VAT).

Penalties and interest charged under any of these tax types will be waived in full upon full payment of the principal amount of tax; It is available in respect of penalties and interest accrued in respect of tax periods and tax years prior to the 1st July, 2021 under both the Income Tax Act and the Value Added Tax Act.

The Scheme targeted 22,839 taxpayers with Income Tax and VAT arrears amounting to approximately P6.8 billion. These arrears comprised of principal tax of P2.5 billion, interest of P3.5 billion and penalties of P800 million.

However, despite efforts by BURS, through different public and private media platforms, to encourage taxpayers to take advantage of the Scheme, uptake of the Scheme has been very low. As at 30th November, 2021, out of a total of 22,839 taxpayers in arrears, 3,377 taxpayers, representing about 15% of the taxpayers in arrears, had applied for the Tax Amnesty Scheme.

In terms of collection, a total principal tax of P64 million, comprising of Income Tax of P34 million and VAT of P30 million was paid. Total written-off (pardoned) interests and penalties stood at P95.6 million, comprising of P65.4 million in respect of the Income Tax and P30.2 million in respect of VAT. Overall, tax debtors who have sought to take advantage of the Scheme only contributed an average of 2% of the outstanding debt.

Critically, fifty-four (54) of the taxpayers who have applied for Tax Amnesty have entered into payment plans to clear their principal tax obligations of P44.9 million to enable them to qualify to benefit from the scheme by 31st December, 2021. Among the challenges faced by many taxpayers have been the continued problems due to the impact of COVID-19 pandemic on their businesses. To this end, BURS has been inundated with pleas from bodies representing taxpayers, such as Botswana Institute of Chartered Accountants (BICA) and Business Botswana (BB) and individual taxpayers; to extend the Amnesty period.

The plea of representatives of taxpayers is based on the fact that a substantial number of their clients have the desire to take advantage of the Scheme but are constrained to pay their principal tax liabilities within the time remaining due to cash flow challenges occasioned by limited business as a result of the COVID-19 pandemic. BURS has also received appeals for payment plans that would stretch beyond the deadline of 31st December, 2021 from many taxpayers with significant tax liabilities.

Mr. Speaker, another challenge is that of data reconciliation at BURS as a result of migration of data from the legacy systems to the current tax administration system (Lekgetho Live), which was launched in May 2020. To mitigate against this challenge, BURS has engaged ninety five (95) temporary employees to expedite the reconciliation of taxpayer accounts by end of December 2021. Therefore, more time is necessary to allow taxpayers, after reconciliation of their accounts to enjoy the scheme.

In this regard, an extension of the Scheme would, therefore, create an opportunity for BURS to engage with more taxpayers and update their taxpayer information. The Ministry, through BURS, commits to undertake the following initiatives to improve uptake of the Scheme:

To make direct contact with taxpayers that owe significant amounts of tax; make them aware of their obligations and encourage them to enroll on the Scheme; Ensure that initiatives for marketing the Scheme are more direct, deliberate, and frequent and to the extent possible engagement of influencers; and To continue to engage with industry representatives in expediting resolution of queries and challenges of their constituents. In this regard, Government has once more seen it worthwhile to extend the Tax Amnesty Scheme from 31st December, 2021 to 30th June, 2022 to allow more taxpayers to benefit from the dispensation.

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