TAXATION RECIPE FOR SOCIAL DISCONTENT

THERE was panic when the public learnt that the revised tax law will have far reaching effects on taxpayers.  Information that was in social media was that stokvels and cooperatives savings will be taxed. There was an immediate angry reaction from some taxpayers, who felt that it was not fair to further burden the already highly taxed individuals yet salaries for majority of the low and middle class remain static, as evidenced by the fact that public servants have not been getting increment, even when they do it was below inflation.  

Also, that the review of salaries for public servants has been in the negotiations table for some time. Sensing the public anger, the Eswatini Revenue Service was quick to clarify what was contained in the revised tax law, noting that the law exempted taxation of cooperatives, as it was the norm in the amended legislation.  They informed the public that before amendment the laws stated that “Natural persons receiving interest or dividends on the first E20 000. “Tax at 10 per cent would apply in any excess above E20 000 (section12 (1) (qq) of the income tax order, 1975,” effective from July 1, 2024, natural persons receiving interest from Cooperatives Societies are exempt from paying tax on the interest earned, regardless of interest amount received.

Please refer to the new sections 12(1) (qq) of the Income Tax (Amendment) Act 2023. ERS also noted that “finance institutions, cooperatives societies and building societies were required to withhold tax, at 10 per cent from payment of interest or dividends on society shares to any person – Section 32C (1) of Income Tax Order 1975.   With effects from July 1, 2024, cooperative societies are no longer required to withhold tax on the payment of interest or dividends to natural to natural persons.”  See section 32 C (1) of the Income Tax (Amendment) Act 2023.

Why do taxes matter?  

According to World Bank, taxes foster economic growth and development. Governments needs sustainable sources of funding for social programmes including health, education, infrastructure, security as some of the important services to achieve the common goal of a prosperous, functional and orderly society. Taxes are also a key ingredient in the social contract between citizens and the government.  According to tax justice advocacy, taxes are not meant to deprive citizens of their hard-earned money, but are critical for four reasons:  
Funding to deliver services to citizens.

• To address poverty and inequality, as part of redistribution building accountability of governments to citizens and reclaiming policy space.
• Encouraging public ‘good’.
• It also stresses that every government in the world has certain responsibilities regarding its citizens.

The minimum requirement for the fulfilment of economic and social rights include provision of essential health care, basic shelter and housing, basic education to mention a few.

Why taxes are source of discontent?

Citizens have an obligation to pay taxes so that government will deliver quality, human right centred services. What is causing citizens to resent taxes is that funds collected from citizens are mismanaged.  In 2022, the Time of Eswatini reported that the then Deputy Chair of the PAC, Sibusiso ‘Scorpion’ Nxumalo shocked the nation when he said during a debate of the PAC committee report that the country was losing E91 million a month, which totals to E1.2 billion Emalangeni annually. Further compounding the problems are estimated billions of Emalangeni unauthorised spending by some ministries and departments. And sadly, no one is held accountable. Also, worth noting is that there has been a constant decline in services offered by ministries and departments in Eswatini, because of what been commonly referred to as lack of resources.  

For example, the Ministry of health, whose mandate is to save lives, has been hard hit by drugs and other essentials shortages for a long time.  A forensic audit was conducted to identify the root causes and of course the report has shocked the nation. However, instead of culprits being apprehended to face the might of the law, the audit itself has been discredited, whilst patients lose lives. It was reported by newspapers that renal patients decided to join hands in purchasing the much-needed lifesaving drugs.  Even with call for ‘Nkwe’ by His Majesty, the situation remains unresolved.  The education sector has also not been spared as the grants have not been paid on time resulting in schools not able to pay for its administration staff and procure much needed teaching material.  

The schools have also not received food commodities for the children to get at least a nutritious meal. It is indeed unforgivable for the government to fail to use the money it collects through direct and indirect services to deliver services to emaSwati, yet this issue was widely discussed at Sibaya 2023.

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