TAX RATIO MEETS IMF TARGET

MBABANE – Eswatini Revenue Authority (SRA) has achieved a tax-to-GDP ratio meeting international standards.

The tax-to-gross domestic product ratio is another common measure of the efficiency of the tax administration and tax policy in an economy.  It is simply a measure of a nation’s tax revenue relative to the size of its economy as measured by gross domestic product (GDP). An increasing tax to-GDP ratio indicates improved efficiencies. SRA achieved a domestic tax-to- GDP ratio of 15.2 per cent in 2019/20, against a target of 15.3 per cent. This shows a marked improvement from the tax-to-GDP ratio of 14.4 per cent recorded in 2018/19.
Despite being below local targets, the 2019/20 figures match the minimum stands set internationally, especially the International Monetary Fund. According to the International Monetary Fund, developing countries should have a tax-to-GDP ratio of at least 15 per cent to ensure they have the money necessary to invest in the future and achieve sustainable economic growth.

Eswatini is a developing country and it is classified as a lower-middle income economy. “The below target performance in 2019/20 is mainly due to lower than target tax revenue collections in VAT, Pay-As-You Earn, (PAYE) and Other Income Taxes (OIT). “Total revenue-to-GDP ratio (including SACU revenue) stood at 24.6 per cent in 2019/20, an improvement from the 23.8 per cent recorded in the previous year, owing to better performance in both domestic revenue collections and SACU receipts,” reported SRA.

highlights

SRA highlights that this is a difficult measure to target for the SRA, as while the organisation collects customs and excise duties, it does not account for these as revenue as they are transferred directly to the Common Revenue Pool and later get them back as part of the revenue sharing arrangement under the Southern Africa Customs Union (SACU). In the report, SRA Commissioner General Dumisani Masilela said they managed to collect a total of E9.950 billion in revenue, an impressive 10.6 per cent growth that is far above the rate of nominal GDP growth.

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This collection fell  three per cent below the target of E10.295 billion, being a shortfall of E344 million, which is a close margin given the level of economic activity and delays in approval of planned policy related revenue improvements. “In addition to this positive growth in revenue, our operational cost of collecting revenue,which is an important measure to determining our efficiency as an administration, decreased by 0.2 percentage points to 3.9 per cent, reaching the lowest since inception of the SRA, indicating an improvement in operations efficiencies,” said Masilela.

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