Botswana continues to make strides in increasing tax transparency through the sharing of information with other countries as a new Bill is expected to be debated in this July 2020 session of Parliament to further make the country tax transparent.
The Bill, which was published in the Government Gazette of April 17, 2020, is expected to soon become law, should it get the nod from the Parliament. The Minister of Finance & Economic Development, Dr Thapelo Matsheka said the Bill aims;
“To provide for Botswana to meet her international obligations regarding the effective exchange of tax information and transparency in tax matters before signing the OECD Convention on Mutual Tax Administrative Matters.”
The new Bill seeks to amend section 5(4)A of the Income Tax Act to make it clear that the country will still be able to share tax information with any other country, despite provisions of other laws, particularly inter-country tax agreements which may provide for the non-sharing of tax information. In other words, the new Bill seeks to make Botswana more transparent by having the Income Tax Act override any law which may provide for secrecy in information sharing when requested by another country.
Why tax transparency?
This Bill is a step forward in the country’s drive to increase tax transparency through sharing information with other countries, mainly to deter tax evasion and money laundering. It comes at a time when the country amended the Income Tax Act back in 2012 to allow it to enter into international treaties called Exchange of Tax Information Agreements with other countries. This followed damning utterances by the then President of France, Nicholas Sarkozy, who labelled Botswana a ‘tax haven.’ President Sarkozy also hinted that such a tag would reduce inflows of the much-needed foreign direct investment (FDI). Most developed countries shun nations listed as tax havens, regarding them as promoters of harmful tax practices, including tax secrecy. Botswana then entered into several Exchange of Tax Information Agreements to shrug off the tax haven tag.
The new Bill promotes enhanced tax transparency and the international exchange of tax information, regardless of what other statutes may prescribe. The law comes as Botswana prepares to become a member of the OECD Convention on Mutual Administrative Tax Assistance in tax matters, which wages war against tax secrecy in all its forms. International development NGOs usually state that tax secrecy and hiding taxes in certain countries is perpetrated by some multinational enterprises, prejudicing other countries of revenue. International media has widely reported about some multinational entities allegedly having used their international footprint to hide taxes in certain countries.
Recently, American multinational technology giant, Apple fought off accusations levelled at it about allegedly hiding US$15bn tax in Ireland, which it earned from Europe, Africa, the Middle East and India. Siemens and Google are other global companies facing similar accusations. The exchange of Tax Information agreements and general tax transparencies fight damaging tax practices and remove the risk of being labelled as a tax haven.
The amendment helps improve Botswana’s rankings from a tax transparency perspective, which is a key factor in attracting FDI. With the country currently blacklisted under the EU money laundering protocols, the amendment is likely to herald the country’s resolve to remain transparent and also abide by the OCED convention on mutual tax assistance.
Article by Jonathan Hore – a Managing Tax Consultant at Aupracon Tax Specialists. Please send any feedback to email@example.com. This article is general and does not seek to address particular matters of any person.