Swaziland staggers under new tax regime
14 August 2012
Posted by: SAIT Technical
By Mantoe Phakathi (Business Report)
Big COMPANIES are slashing food rations and other benefits, NGOs are being stifled and some businesses are under threat as the Swaziland government's drive for VAT collections, pegged at 14 percent, have sent the cost of doing business spiralling in the cash-strapped kingdom.
Some used-car businesses have closed down as the Swaziland Revenue Authority (SRA) has been vigilantly collecting taxes in an attempt to meet the shortfall created since 2009 when the kingdom's revenue from the Southern African Customs Union plummeted by 60 percent.
NGOs are also feeling the pinch as the government charges VAT on goods, an expense donors do not cover.
"Tax falls under disallowable taxes,” the director of the Co-ordinating Assembly of NGOs, Emmanuel Ndlangamandla, said. Donors did not want their money to pay for taxes because they were assisting the very same government to deliver services to its people, he said.
The tax refund process also took two months, a process that both Federation of Swaziland Employers and Chamber of Commerce chief executive Zodwa Mabuza and Ndlangamandla said was too long.
As a result, Ndlangamandla said, some NGOs were closing down while others faced serious difficulties in delivering services to poor people.
Mabuza said the SRA was charging VAT on previously exempt commodities for low-income workers in the agricultural sector. "(The) SRA classifies food rations under entertainment,” Mabuza said.
The SRA is charging VAT on previously untaxed agricultural inputs, yet 70 percent of the country's economy is dependent on agriculture, with the majority of the sector constituting rural subsistence farmers.
Mabuza said the pressure to collect revenue at a time when businesses and consumers were out of pocket was not helping the situation either.
About a third of the country's workforce is unemployed while big firms such as Sappi Usuthu and Swazi Paper Mills closed down in 2009, further straining sub-Saharan Africa's slowest growing economy.
The country's economy has grown at an average of 2.7 percent a year in the past 10 years.
"We were not supposed to introduce VAT before improving the economy,” economist Dumisani Sithole said.
The inflation rate is at 9 percent and basic food commodities such as maize meal, rice, sugar, beans and cooking oil have risen more than 20 percent since the start of the year.
"Some businesses are charging VAT on commodities that are exempt, which has drastically increased food prices,” Sithole added.
He said the government had not introduced a strategy to aggressively ensure employment creation although it had widened the tax base by taxing previously exempt commodities and people.
Many people raised the taxation issue at the People's Parliament last week when King Mswati III summoned the nation to submit their views on socio-economic issues.
However, the SRA said its hands were tied because these were policy issues supported by the VAT Act.
Dlamini said if businesses believed that they were making a considerable loss then they should raise this with the government. The same went for NGOs that were "only exempt on funds coming from foreign donors”.