Border closures strain SACU receipts

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Mpho Tebele

Gaborone – Members of the Southern African Customs Union (SACU) should brace for lower revenues as the region swelters under the heat of closed borders as a result of Covid-19, tax specialists warned week.

SACU Members - Botswana, Lesotho, Namibia South African and Eswatini - forward all collections from customs, excise and other duties into a Common Revenue Pool that is divvied according to an agreed algorithm.

Tax specialist Jonathan Hore from the Botswana-headquartered aupracon agency said economic uncertainty fuelled by Covid-19 would negatively impact SACU revenue collections.

The IMF in April 2020 also forecast that SACU economies would decline an average 5.6% this year.

Other tax consultants - Tshiamo Badisang and Letlhogonolo Lebotse – concurred with Hore’s grim outlook, adding that countries in the region would also feel the effects of reduced investment.

They anticipate that the 13.1 percent slowdown in Botswana’s economy, and the 5.2 percent contraction across SACU, will shed around 14.5 percent of anticipated domestic and bloc-wide revenues.

Hore, Badisand and Lebotse project that revenue collections were expected to be P44.4 billion before COVID-19, but this would now shrink by about a seventh.

“VAT will also be directly impacted by the closure of borders, disruption of supply chains, among other reasons. Further, corporate tax and Pay as You Earn (PAYE) depend on the performance of the economy and anything that has the capability of reducing economic growth cuts corporates’ profits,” they said.

Botswana’s tax authorities had already reduced their revenue targets when the pandemic hit the country in the first quarter of 2020.

In April, Botswana’s Finance Minister, Thapelo Matsheka, indicted that the economy could contract by 13.1%, and VAT collections would reduce from the budgeted P8.55 billion to P7.6 billion.

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