Times Of Swaziland: ERS TARGETS CONSTRUCTION SECTOR WITH TAX AUDITS ERS TARGETS CONSTRUCTION SECTOR WITH TAX AUDITS ================================================================================ Nhlanganiso Mkhonta on 10/04/2025 08:49:00 MBABANE - ERS has identified a significant tax compliance gap within the construction sector, which it believes is contributing to the country’s growing value-added tax (VAT) shortfall. In response, the Eswatini Revenue Service (ERS) has issued a request for proposal (RFP) inviting consultancy firms to undertake forensic tax audits and to establish a dedicated tax intelligence network aimed at curbing tax evasion and improving enforcement. This bold move signals ERS’s strategic shift towards intelligence-driven tax administration as it seeks to crack down on systemic non-compliance in one of Eswatini’s most economically active sectors. The construction sector in Eswatini has seen steady growth, fuelled by both public infrastructure projects and private sector investments. However, the ERS has identified a disturbing trend: Widespread underreporting, fraudulent refund claims and unregistered transactions that ultimately undermine tax collection efforts. Leakage According to the RFP document published on the Eswatini Public Procurement Regulatory Agency (ESPPRA) website, internal tax audits have revealed several weaknesses in the VAT value chain—from the importation of construction materials to local purchases and eventual outputs. The discrepancies have prompted the need for a targeted forensic audit to reveal the true extent of revenue leakage. The tax authority acknowledges that while its internal audit teams have made efforts to track compliance, the magnitude of the challenge requires external expertise with advanced digital forensic capabilities and experience in uncovering hidden tax fraud schemes. The consultancy assignment is anchored on two main pillars: Conducting in-depth forensic VAT audits of the construction sector, and establishing a sustainable tax intelligence network. Among its key objectives, the ERS aims to: w Uncover underreporting, fraudulent activity and other non-compliance within the construction sector. w Assess weaknesses along the VAT value chain. w Recommend targeted interventions to plug the revenue leakage. w Develop a structured intelligence framework to proactively detect and report tax evasion schemes. w Provide actionable policy and enforcement reform suggestions. The scope of work outlined in the RFP is far-reaching and rigorous. Consultants are expected to use a risk-based approach to identify businesses within the sector most likely to be engaging in VAT fraud. These include practices such as: w Underreporting of imported goods at borders. w Manipulated sales declarations. w Cash transactions designed to escape formal accounting systems. w Fraudulent VAT refund claims involving fictitious suppliers or shell companies. w Unrecorded sales to related parties. The consultants will be required to employ electronic forensic techniques, including the analysis of digital accounting systems, point-of-sale data and covert transaction monitoring (e.g. mystery shopping) to compare actual versus reported sales. Each audited entity will be issued a detailed audit report, complete with quantified tax liabilities and recommended enforcement actions. A particularly innovative component of the assignment is the establishment of a tax intelligence network—something ERS believes will help shift the country’s tax enforcement approach from reactive to proactive. The intelligence network will be designed to gather and analyse information on tax evasion schemes, with inputs from whistleblowers, informants and internal data sources. The consultants will develop a secure and anonymous reporting mechanism to encourage insider tips, and will also train ERS personnel on how to use intelligence in audit selection and investigation. This intelligence blueprint is expected to be a game-changer in how Eswatini monitors compliance and recovers lost revenue. Intelligence The consultancy assignment also includes a strong focus on capacity building within ERS. Consultants will be required to design and deliver workshops and training sessions for ERS auditors on advanced forensic audit techniques and intelligence-led investigations. Moreover, the consultants are expected to propose policy changes and enforcement reforms to close loopholes and ensure long-term compliance in the construction sector and beyond. In a shift from traditional consultancy payment models, ERS is linking consultant compensation to performance. Under the financial proposal structure, only 30–40 per cent of the contract value will be paid as a retainer upon completion of the audits and establishment of the intelligence network. The remaining 60–70 per cent will be contingent upon measurable outcomes, such as: w The percentage of additional tax assessed and collected. w Disruption of identified tax evasion schemes. w Evidence of improved VAT declarations by audited construction firms. w Recoveries resulting from intelligence-led enforcement actions. This performance-based model reflects ERS’s intent to ensure value for money and maximise the return on public investment in this consultancy. To be eligible, consulting firms or individuals must demonstrate a proven track record in forensic tax audits, intelligence gathering and enforcement within revenue authorities or tax administrations. Experience in establishing similar intelligence frameworks is considered a distinct advantage. Prospective consultants are required to submit both technical and financial proposals, including detailed methodologies, timelines, personnel profiles and cost breakdowns. They must also provide evidence of successfully completed similar assignments with references. The consultancy is expected to last six months, with a possibility for extension depending on performance and evolving needs within ERS. As Eswatini seeks to enhance domestic revenue mobilisation and reduce reliance on SACU receipts, improving tax compliance is imperative. The construction sector, due to its complexity and informality, has long been a blind spot in tax enforcement. This new initiative signals a more aggressive and data-driven approach by ERS to close the tax gap. The success of this project could serve as a model for other sectors and perhaps inspire a broader overhaul of Eswatini’s tax administration practices. More importantly, it reinforces the ERS’s commitment to fairness, transparency, and accountability in tax collection.