Government introduces digital tax

Government has geared up on plans to impose a digital tax on tech giants following the recent publishing of the value added tax (VAT) amendments proposals. Technocrats at the finance ministry, Botswana Unified Revenue Services (BURS) and consultants have drafted a raft of proposed changes to the country’s VAT with a bias towards increasing revenue and digital leap.Apart from introducing taxes on remote services, the amendments also seek to introduce mandatory electronic invoicing through electronic billing machines to curb tax evasion. The Minister of Finance, Ndaba Gaolathe said the amendment seeks to modernise the VAT system, align it with international best practices, broaden the tax base, enhance revenue collection, and significantly improve tax compliance through digital transformation.The Minister further said the use of electronic fiscal devices will enhance the country’s ability to combat VAT fraud, improve the accuracy of VAT declarations, streamline audit processes, and ultimately lead to a substantial reduction in the VAT gap, to increase revenue collection. Some of the companies likely to be affected under the growing digital economy include Google, Facebook, Amazon, Netflix and iTunes, as they earn income from the local economy without a physical presence.The digital tax decision comes after neighbouring economy, South Africa and other countries on the globe have introduced the tax and the initiatives will align with African Tax Administrators Forum (ATAF) guidelines. In addition, the new tax amendments are expected to cushion the country’s cash-strapped coffers, though not yet clear how much is anticipated to be received from the digital tax. Aupracon Tax Specialist, Jonathan Hore has allayed fears of the tech giants not complying with the proposed tax amendments. “These are international giants who try by all means to be compliant on tax rules,” said Hore, citing that the development will increase revenue for Botswana Unified Revenue Services (BURS).Other analysts have indicated that the digital tax aims to capture revenue from digital services provided by non-resident companies, align with international efforts to address base erosion and profit shifting (BEPS) and ensure fair contribution to the country's economy. On the introduction of electronic billing machines, Hore said companies may be tempted to manipulate their sales and the machines will curb such developments. He said the machines will improve the overall collection of tax by BURS, as previous studies have indicated that 60 percent of tax payers do not comply with taxes.

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Government introduces digital tax