At least 10 firms have applied for the SPEDU tax arrangement under which those approved are set to enjoy revised rates of five percent instead of the prevailing 22%, BusinessWeek has established.
The special tax arrangement is part of a range of initiatives driven by the government to boost economic activity in the Selebi-Phikwe region, which was dealt a heavy blow by the October 2016 closure of BCL Mine. Other incentives include zero customs duty on imported raw materials as well as fast-tracked land leases, licenses, permits and utilities.
According to a draft of the tax order, which was tabled before Parliament on Wednesday, the five percent tax rate would only apply to companies engaged in manufacturing, tourism and agriculture.
After the first five years of enjoying the discounted rate, businesses would then be required to pay 10%. The order also states that the special rate will only apply to businesses in Selebi-Phikwe, Bobonong, Mmadinare-Sefhophe, Lerala-Maunatlala and neighbouring villages, farms and cattle posts.
Government sources said at least 10 companies have already sent applications to the Ministry of Finance and Economic Development, tasked with vetting all companies and approving their participation in the deal. The Ministry’s spokesperson, Fenny Letshwiti told BusinessWeek that the companies would have to wait for Parliament to decide on the tax deal, tabled as Statutory Instrument No 19.
“We are arranging to take it to the current session of Parliament for approval and it is only then that we can process applications from companies in the region,” he said.
Letshwiti said both existing companies operating in the SPEDU area and those beyond Botswana borders could apply for the tax incentives. The SPEDU tax deal has been well received by most experts who say it carries the potential of resuscitating business in the dying region.
“Of course, some tax has been sacrificed but it is in exchange for jobs and wealth creation,” said Aupracon managing tax consultant, Jonathan Hore.