Last week we looked at a few methods other jurisdictions use to address the problem of profit extraction caused by the use of transfer prices.
We are hopeful that very soon BURS will consider coming up with their regulations and policies on transfer pricing which will guide taxpayers on attaching prices to their cross border transactions.
In this week’s article we want to consider another tool that could be used to generate more tax for the economy, namely provision of a quality service to our customers who are other taxpayers. This does not only refer to BURS alone but also to any business person when dealing with his customers. By giving a quality service you are reducing their cost of maintenance and hence saving on their profits and thereby giving them a chance to pay more tax.
Recently I travelled up north in one of our family vehicles and we had a breakdown, 60km out of Mahalapye. While we were there wondering what our next move would be, a roadside mechanic arrived on scene and helped us identify the problem. That was around 9:00 a.m. in the morning. I took a sample and headed for Mahalapye, looked for a telephone directory and then called all the spare parts shops and none had the part.
Then I called a garage by the name Webb Motors and their response was exceptional. Mr. Webb asked me where I was, came in his Benz, took me to Napa Motors, got them to order the part from Gaborone, called one of his associates in Gaborone to collect the part and put it on the 12:00clock bus.  He then called the tow guys to go and bring the car into the garage. He picked up the part from the bus and called one of his local mechanics to replace it.
By 5:30 I was heading home without the car but marveling at the quality of service I received. It was a “wow” kind of situation. And did I say it was the first time I saw Mr. Webb?  Hence this article, not to thank Webb Motors but to remind every dealer that whatever service you provide has a direct impact on you as a taxpayer. It can increase your profit in the long run and make you a better citizen in that you won’t be declaring continuous losses, especially during these times of credit crises where consumption has dropped and competition is tight.
Let me give a simple example we will identify with. If you are a sole distributor of a car model and you make your spare parts so difficult to obtain or so costly, then in the long run it is either customers will resort to pirates, who make the car not as efficient as intended, or they will sell the car to other people in the second hand market. But I can bet that no matter how good your upgrading is at least half of the first set of customers will be lost to competitors.
The tax consequences of such dealer actions are that in the long run they lose customer loyalty leading to loss of profits and lesser and lesser contribution to economy in the form of tax. The cost of underperforming or providing poor quality service affects the whole economy. It does not matter where you are working.
You could either help the economy make more money or make it worse off.  Comments may be sent to cecilia222ramabu @yahoo.com or ceciliar@bac.ac.bw