Serame, Keorapetse clash over corporate tax
The Minister of Finance and Economic Development, Peggy Serame, and Member of Parliament for SelibePhikwe West clashed over the collection of corporate tax by the government.
Keorapetse had asked the Minister how much has been raised from corporations in terms of corporate income tax for each of the past three financial years and the percentage contributions to total taxes; and why corporate income tax cannot be raised from 22 percent to 30 percent.
The Minister explained that as much as income tax is a fiscal tool, it is also an economic management instrument to promote growth and economic development. As a fiscal tool, corporate income tax is indeed an important source of Government revenue, she said. “However, worldwide, countries use the rate of corporate income tax as part of their economic instruments to improve their ease of doing business environment as indicated in the World Bank Ease of Doing Business Report.
“It is for this reason that in determining Botswana’s rate of corporate income tax, there is a need to balance between the two objectives; namely fiscal and economic development”.
Keorapetse who was not satisfied with the answer argued that the Minister, through BURS, is collecting tax like a country at war or a dysfunctional government at a 12.6 percent tax to GDP Ratio.
“You get the impression that Botswana is a banana republic! There’s inefficiency and ineffectiveness in tax collection and corporations pay very low taxes. “In the last three years, Corporate Income Tax was collected at an average of 19 percent of total taxes. This is low. It is below the average corporate tax rate for Africa overall, which is 28.45 percent, and the global average of 24.18 percent”.
He said comparable countries in the region such as Namibia and South Africa collect higher in terms of CIT and Tax to GDP Ratio. “We are a tax haven according to some observers such as EU in the past,” said Keorapetse, who argued that the reasoning on ease of doing business must be rejected because Botswana, despite low corporate taxes, attracts low Foreign Direct Investment ( FDI), which stands at 2 percent relative to GDP on average annually compared to others in the region such as Namibia where the corporation tax rate is 25 percent for listed companies and is 35 percent for unlisted public and private limited companies, for banks, insurance, and other financial institutions, the corporation tax rate is 37.5 percent if listed and 40 percent if not listed.
He stated that ease of doing business is also very poor in Botswana and the reasoning that low corporate taxes serve to aid it is inadequate and should accordingly be rejected. “Big Corporations should pay more because they can afford and accordingly workers and or middle class and Batswana, in general, should pay lower because they can’t afford. The Minister is looking for excuses for corporations to pay lower taxes.”