Govt to add more and raise taxes
AMidst the continued decline in the country’s Southern African Customs Union (SACU) receipts, government has decided to enhance domestic revenue which will see the introduction of new taxes and a possibility of increasing some.
Minister of Finance Martin Dlamini speaking during breakfast meeting hosted by the Federation of Swaziland Employers and Chamber of Commerce (FSE&CC) said the ministry was proposing three domestic revenue enhancing strategies.
Dlamini said the ministry was working tirelessly on improving the ratio of domestic revenue vis-a-vis SACU receipts.
The breakfast meeting was themed ‘conversations on regional integration, SACU receipts and the fiscus’. He said amongst the revenue generating plans, government contemplated introducing a levy on alcohol and tobacco products at a five percent rate for locally produced alcohol and tobacco goods and 10 percent for imports of alcohol and tobacco products.
The minister said this would yield an estimated E90 million of domestic annual revenue for the country.
Dlamini said the introduction of the Value Added Tax (VAT) on April 1, 2012 instead of Sales Tax increased indirect tax revenue.
He said there were losses in revenue collected from alcohol and tobacco products.
“The Sales Tax Act of 1983 (as amended) levied 20 percent on locally produced alcohol and tobacco products and the rate on imports was 30 percent prior to VAT introduction on April 1, 2012. But the standard VAT rate is 14 percent for local products as well as imports of alcohol and tobacco products. This leads to a loss of about E50 million annually, especially on alcohol products,” he said.
The minister said the ministry was also working on overhauling the Income Tax Order so as to ensure a level playing field for all companies.
He said the taxation of gains on disposal of business assets would also be considered. Dlamini said there was need to remove the distinction of current and capital receipts in defining business income as it is no longer in conformity with international best practise. The minister said this would minimise tax avoidance possibilities.
He said the taxation of residents on worldwide income to extend the country’s jurisdiction to tax foreign source of income residents would also be considered.
Dlamini said the introduction of tax incentives focusing on labour intensity of investment would result in new jobs created in the country’s economy.
He said the ministry also planned to review personal and corporate tax rates to a level equal to average rates in the region as well as tightening anti-avoidance provision. He said they would introduce additional anti-avoidance such as transfer-pricing, thin capitalisation, income splitting, dividend stripping.
“The ministry intends to broaden and tighten taxation of income in-kind as well as refining depreciation rules. The rationalisation of penalty provision and making a distinction between penalties for serious offenses as well as applicable on late returns filling will also be considered. This will yield an estimate of E100 million annual revenue for the country,” he said.
The minister said the Customs and Excise Tax Act would be amended which would see the introduction of preferred trade accreditation agreement. He said this would allow clearance of goods in the shortest possible time for traders to qualify, thus facilitating trade.
SACU revenue formula might spell doom, gloom
The review of SACU’s revenue sharing formula might spell doom and gloom for Swaziland.
Minister of Finance Martin Dlamini said there was uncertainty regarding to the country’s revenue received from the SACU pool.
The minister cited various trade liberalisation negations, which would imply that the customs component would be reduced as one of the reasons for the SACU dilemma.
Dlamini said the 2002 SACU revenue sharing formulae was being reviewed adding that the outcome of this might be favourable or unfavourable for Swaziland. He said the cyclicality of customs revenue also posed a significant threat to the smooth revenue flow, this is because the customs component was linked to demand for imports which were in turn associated with the business cycle.
The minister said Swaziland received more than 50 percent from the SACU revenue pool which was all spent by the country thus the need to seek revenue diversification strategies. Dlamini said the SACU revenue pool comprised the customs, excise and development components.
“About 75 percent of Swaziland’s revenue received from the SACU revenue pool is from the customs component. This is the gross amount of customs-specific and ad valorem duties collected from imported good into the Common Customs Area (CCA). The excise component is in order of 85 percent of the gross amount of duties collected on goods collected in the CCA,” he said.
The minister said the development component made up the remaining 15 percent of the excise component.
Taxpayers taxed to the bone already – FNB boss
FIRST National Bank (FNB) Chief Executive Officer Dennis Mbingo says taxpayers in the country are being taxed to the bone yet government’s expenditure pattern is not coming to the picture.
He made this view during a question and answer session at the FSE&CC breakfast meeting held at the Happy Valley themed ‘conversations on regional integration, SACU receipts and the fiscus’.
Meanwhile, FSE&CC President Sandile Simelane said it was time that local businesses seized opportunities even from the country’s SADC counterparts.
He said Mozambique was the fastest growing economy thus was a potential market for locals operating businesses.
“You cannot trade 100 percent, by this as a business you cannot grow. The market is too small,” he said.
Simelane added that the recent reforms in the country’s system are creating a positive image internationally.
He said despite the latest developments, Swaziland was known for bad things. “The problems in the justice system were affecting the ability to attract businesses out there. Change is the only constant variable, if you do not change you will not succeed,” he said. Simelane said government must be engaged so as to come up with a way of incentivising foreign investors to come and open businesses in the country.
SD has infrastructure way ahead of itself- consultant
Consultant on African business development Victor Kgomoeswane has observed that Swaziland boasts infrastructure which is way ahead of itself.
Kgomoeswane was the moderator during the FSE&CC breakfast meeting held at the Happy Valley.
He said though African countries were criticised for not having good infrastructure, it was a different case for Swaziland as infrastructure here was very good.
Adding, Kgomoeswane made reference to the country’s international airport which he said had the potential of introducing about 10 airlines.
He said the airport could be a robust hub with duty free shops and many other services an international airport would house.
Govt domestic revenue
n Alcohol, tobacco products (local) levy-5%
n Alcohol, tobacco products (imports) levy-10%
n Govt to generate E90m per year
n Tax on foreign source of income
n Review of personal and corporate tax
n Govt to generate E100m per year
n Preferred trade accreditation
What is SACU?
The Southern African Customs Union (SACU) consists of Botswana, Lesotho, Namibia, South Africa, and Swaziland. The SACU Secretariat is located in Windhoek, Namibia.
SACU was established in 1910, making it the world’s oldest Customs Union.
Historically, SACU was administered by South Africa, through the 1910 and 1969 Agreements. The customs union collected duties on local production and customs duties on members’ imports from outside SACU, and the resulting revenue was allocated to member countries in quarterly installments utilising a revenue-sharing formula. Negotiations to reform the 1969 Agreement started in 1994, and a new agreement was signed in 2002. The new arrangement was ratified by SACU Heads of State.
The economic structure of the Union links the Member states by a single tariff and no customs duties between them. The member States form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the member states for products originating in these countries; and there is a common external tariff that applies to nonmembers of SACU.