ERS COLLECTS OVER E10BN IN TAX REVENUE

MBABANE - Eswatini Revenue Service (ERS) collected a total of E10.787 billion tax revenue for the financial year 2021/22.

The figures contained in the institution’s Integrated Annual Performance Report, reflected that the collections were 10 per cent below the target amount of E12.022 billion. The report was presented in Parliament yesterday. The shortfall of E1.235 billion was above the previous year by E0.842 billion. Tax revenue is defined as the revenues collected from taxes on income and profits, social security contributions, taxes levied on goods and services, payroll taxes, taxes on the ownership and transfer of property and other taxes.

Tax revenue is collected world over and is mostly regarded as one measure of degree to which the government controls the economy’s resources.  
For a second consecutive period in the past five years, tax revenue collections grew below the economic growth rate, which could be defined as a characteristic of a declining revenue administration. In 2021/22, the tax revenue grew by 8.5 per cent but was still lower than the nominal gross domestic product (GDP) increase of 10.9 per cent as reflected in the projections of the Central Bank of Eswatini (CBE) and the Ministry of Economic Planning and Development.

Deficiency

The deficiency in tax collections was observed across most of the major tax indicators, which ERS attributed partly to slow economic recovery after the COVID-19 pandemic, as well as weakened economic performance since the episodes of political unrests, which began in 2021. However, ERS observed that there was a positive performance on a year-on-year comparison, indicating a recovery from the COVID-19 era. The average domestic revenue growth rate for the past five years was 5.3 per cent this year, which is 4.7 percentage points below the long-term average of 10.0 per cent.

Personal income tax (PIT) and value added tax (VAT) contributed the most tax revenue, at 35.19 per cent and 17.03 per cent respectively, indicating that most of the revenue collected by ERS came from individuals. Other income tax (OIT) and fuel tax contributed the least tax revenue at 4.94 percent and 11.96 per cent, respectively. The manufacturing, wholesale and Retail sectors realised a noticeable increase in revenue contribution while the agricultural sector recorded a decline. The revenue collection was divided into direct taxes and indirect taxes. Direct tax encompasses fuel tax, road toll, sin tax, import motor vehicle levy and value added tax (vat). Indirect tax includes company tax, graded tax, individuals and other income tax.

Highest

Individual tax contributed E3.796 billion and was the highest contributor to the collections. Individual tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest and other income a person earns throughout the year. Graded tax and company taxes contributed e0.012 million and e1.837 billion respectively while other income tax gave e0.533 billion. VAT, which is charged on goods and services, levied at each stage of a supply chain was also a major contributor in the collection with E3.134 billion. Fuel taxes amounted to E1.289 billion while road toll and import motor vehicle Levy gave E0.057 billion and E0.012 billion, respectively.

Alcohol and tobacco contributed E0.029 billion into the collection. ERS Commissioner General Brightwell Nkambule, in a statement, said the performance of the entity was marred by the slow economic growth, which was impacted by the COVID-19 pandemic and the political unrest.
“Although the last few years have been difficult for the ERS, I would like to send my utmost appreciation to the entire ERS family, our employees, who have remained committed to exerting effort towards attaining the revenue target despite the uncertainties in our operating environment brought about by the economic challenges and the pandemic,” said Nkambule.

He stated that despite the sluggish economic conditions and adverse impacts of the pandemic, the 2021/22 financial year was marked by the commencement of the implementation of a new ERS Strategic Plan for the year 2021/22 to 2023/24. Nkambule said their vision was to attain a 100 per cent voluntary compliance for a better country. “ERS continues to hold in high regard, our regional and international partners, who remain an integral part of our business model. For this reporting period, we would like to appreciate the World Customs Organisation (WCO) for extending support through technical assistance in customs initiatives,” he added.

Targets

The report reflects the performance of ERS against its strategy and annual targets. It is compiled in line with legislative and governance framework for the entity. The report demonstrates the organisation’s value creation and focuses on improving it in the short, medium and long term. Chairman of the Board at ERS, David Dlamini, said even though there were challenges, the organisation worked closely towards the targets. He said the Board appreciated the resilience of the staff to the mandate given to them.

“Following a lot of introspection and feedback from stakeholders, focus was placed on changing the organisation from ‘authority’ to a ‘service’ and making it more focused on customers,” he said. Minister of Finance Neal Rijkenberg announced budget estimates of over E26 billion for the 2023/24 financial year.  “SACU receipts will contribute E10.25 billion from E5.8 billion in the previous year. Non-SACU revenue is budgeted at E13.75 billion from E12.8 billion, a growth of seven per cent.

“Total income taxes are projected to be E6.98 billion in 2023/24, a slight increase from the previous year’s budget. This is because of higher expected growth and employment in 2023/24 compared to 2022/23. Out of this, corporate income taxes are E1.8 billion and personal income taxes are E4.5 billion,” said the minister. Rijkenberg also stated that the total taxes on goods and services were expected to be E6.13 billion in the year. He said this was mainly VAT, which was budgeted at E4.5 billion and fuel taxes amounting to E1.36 billion. Economist Thembinkosi Du- be, speaking before the minister’s budget speech said taxes were very important to influence a country’s budget.  “All the different kinds of taxes are very important to the influence of the budget and they are one of the ways any government in the world makes money to boost the national coffers,” said Dube.
He said the country needed to open other avenues of making income in order to reduce the tax burden.

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