E2BN TAX LOST TO SHADOW ECONOMY

MBABANE – Eswatini loses out on approximately E2 billion worth of taxes per annum to the shadow economy.

This revelation has been disclosed by the Eswatini Economic Policy Analysis and Research Centre (ESEPARC) during the public lecture conducted at Happy Valley last Thursday.

Economic Researcher Mangaliso Mohammed explained that the local shadow economy was valued between E20 and E25 billion.
“The shadow economy in Eswatini is believed to be between worth over E25 billion which is to the detriment of the kingdom because this is money that should bolster economic growth,” said Mohammed.

Market Business News refers to the shadow economy as all work, activity and business transaction that occur ‘below the radar’ – economic activity that is undeclared and for which taxes that should be paid are not.

Also known as the informal sector, the black economy, the underground economy, or the grey economy, the shadow economy includes criminal activities such as drug dealing and smuggling, as well as legal jobs, such as gardening, working in construction, or selling products to car drivers at traffic lights.
This part of the economy also includes situations where individuals are forced to work as slaves with no pay, or where work is carried out in exchange for things other than money.

When economists are calculating the GDP (gross domestic product) of a country, they do not include what goes on in the shadow economy.
This means that every country across the world is probably considerably wealthier than official statistics suggest.

Eswatini Revenue Authority (SRA) Commissioner General (CG) Dumisani Masilela when asked what the value of the shadow economy means in terms of tax losses, explained that it was disappointing that some business people and individuals continued to operate under the radar.

“On the basis of the fact that we tax profits, it is believed that if the shadow economy is valued at around E25 billion, the country loses out about 20 per cent of this total value which should have been contributed to the fiscus,” said Masilela.

Unearthed

Independent calculations by the Business Desk unearthed that Masilela’s statement effectively means over E2 billion which should be injected into the economy through taxes does not get paid by the people involved in the illicit trade of goods and services.

It should also be mentioned that about 55 000 Eswatini businesses are compelled to pay taxes while 44 000 of their counterparts enjoy their profits tax-free due to the fact that they are not formally registered in accordance with the Companies Act No.8 of 2009.

As a result of this predicament, which was uncovered during the Micro, Small and Medium Enterprises (MSME) FINSCOPE Survey undertaken in 2017, the country loses out on revenue that could add to the fiscus to bolster economic development.

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