SEC AGAINST 15% VAT ON ELECTRICITY

MBABANE – One would generally expect the Swaziland Electricity Company to welcome government’s proposed 15 per cent VAT on electricity, but that is not the case.

While this proposal, which was announced by Finance Minister Martin Gobizandla Dlamini when he tabled the Appropriation Bill 2018 (2018/2019 Budget Speech) in Parliament on Thursday, will bring down SEC’s operational costs, the company is, however, considerate of the negative impact this move will have on its customers.

The Times SUNDAY understands that it is on this basis, therefore, that the Category A public enterprise has informed government of its opposition to the proposal.
SEC is reported to have indicated to the Ministry of Finance’s Taxation Division that they were against the proposed standard tax rate (15 per cent) and suggested that it supported a zero tax rate “because it promotes economic development of the country”.

Highly-placed sources within the industry revealed that representatives from the Taxation Division simply dismissed the suggestion of zero-rating. “Instead, they proposed the 15 per cent standard rating and a discounted rate VAT refund claim for SEC,” the sources said.

standard rate bad for customers
SEC Marketing and Corporate Communications Manager Sifiso Dhlamini could only confirm that the standard rate would kill their customers as it would be more expensive to buy electricity.
“Disposable income for the customer has not increased but is still the same, so there will be an erosion of their purchasing power if VAT will be added on electricity. For instance, electricity units will now cost 14 per cent more (based on the current VAT rate of 14 per cent). Customers will be worse off than before. If you buy electricity for E100, it means E14 of the E100 will go to the Swaziland Revenue Authority and you will get units for E86 only but because you do not offer taxable services, you will not be allowed to claim back the VAT from SRA and it all goes to government,” Dhlamini explained.

He also stated: “Even though SEC will be able to benefit by claiming back VAT, it has to think of its image and its customers. We have to care about our customers because they are key to us.” Dhlamini drew further attention to the fact that the VAT on electricity was being proposed at a time when SEC had also announced a 15 per cent tariff hike beginning April 1, 2018, something that would make electricity even more expensive if the two were to be implemented at the same time.
The industry sources sought to explain further that had SEC not cared about its customers, it would have cared less about the proposed VAT on electricity.

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