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Sacu Reduces Taxes & Improves Your Life

Publishing Date : 09 July, 2019

JONATHAN HORE

You probably may have heard about SACU and wondered why Botswana is a member of this union as well as how this benefits the populace. That’s the issue that I will address in today’s instalment of my weekly articles. Before I proceed, let me state that SACU stands for Southern African Customs Union and its members are South Africa, Botswana, Namibia, Lesotho and Eswatini (formerly Swaziland). I will analyse the concept of a Customs union in detail below. In this article, words importing the masculine shall include the feminine.

WHAT IS SACU?

SACU is a Customs union which was established 119 years ago, specifically in 1910. It is the world’s oldest Customs union and its role is to facilitate trade amongst the member countries without the need of subjecting the goods to Customs duties. Let me state that if goods move from one country to the other, they generally attract Customs duties, which directly increase the retail cost of such goods.


For example, goods coming from China to Botswana will be subject to Botswana Customs duties. By way of illustration, if laptops costing P 100 000 are subject to Customs duties at say 20%, their cost rises to P 120 000 and the Botswana importer will recover the P 20 000 Customs duties from you and I. In other words, the cost of each laptop automatically goes up by 20%, on the incidence of the Customs duty.

A Customs union such as SACU seeks to reverse the Customs effects of duties by making the member countries operate as one country, meaning that goods can move within member states without having to suffer Customs duties. It also means that Botswana can export goods to any other SACU member duty free. I always like to say that a Customs union kills borders. Technically, for Customs purposes, the Tlokweng Border Post and any other border do not exist as no Customs duties are charged when goods move from a member country to the other.

SACU IMPROVES OUR LIVES

Let me quickly jump to the critical bread and butter issues and I will show you how your life is directly impacted by SACU, for the better. Below are the ways in which SACU improves your life:

Reduced taxes & prices: I demonstrated above that belonging to SACU makes the costs of goods that are imported into Botswana from any member state cheaper as Customs duties are alienated through the destruction of borders. From the above example, if a company imports laptops worth P100 000 from China which are then charged Customs duties at say 20%, such laptops end up costing the importer P 120 000. If each laptop was supposed to cost say P 10 000, it will effectively cost you P 12 000, due to the Customs duties.


However, if the importer sources such laptops from RSA at the same price of P 100 000, the laptops will not suffer Customs duties on the basis that there is no Customs border between Botswana and RSA. Don’t get confused by the fact that the importer still needs to declare the laptops at the Tlokweng border or any other border; that’s just for statistics and VAT but Customs duties are killed through the SACU arrangement.


For your information, experts inform us that Botswana imports about 75% of its goods from RSA and if we were not a member of SACU, we wouldn’t afford the groceries that we are currently purchasing. There we go; SACU makes goods cheaper for everyone staying in Botswana.


Major revenue source: Well, you do not need to be a tax consultant or an economist to know that SACU is the top 3 revenue contributors to BURS’ revenues, meaning that SACU duties build schools, roads, hospitals, to name but a few. By this, I mean that any goods coming from any non-SACU country into any SACU member state are charged Customs duties, which are then pulled into one account and later shared amongst the member states. So, you probably drove on a tarred road that was partly financed by SACU revenues! I guess that you enjoyed the ride; just that you did not know that it was partially financed through SACU revenues.


Reduced inflation: If Botswana was to exit from SACU today, inflation would immediately spike, hitting your pockets directly. Companies would probably not sell as much as they currently do as lesser customers would afford their goods. That would then translate into reduced dividends for the shareholders. Further, higher costs automatically translate into reduced sales and that affects the number of jobs that companies employ. You probably have a job because your employer imports from SACU and is able to make enough profits to pay your salary mainly due to the fact that SACU killed the Customs duties that Botswana traders would otherwise be paying.


Well folks, I hope that was insightful. As Yours Truly says goodbye, remember to pay to Caesar what belongs to him. If you want to join our Tax Whatsapp group, send me a text on the cell number below. Jonathan Hore is the Managing Tax Consultant of Aupracon Tax Specialists and feedback can be relayed to jhore@aupracontax.co.bw or 7181 5836. This article is of a general nature and is not meant to address particular matters of any person.

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