GOVT WRITES OFF UNESWA’S E1.3BN INCOME TAX DEBT

MANZINI - UNESWA is breathing a sigh of relief as government has written off its income tax debt of E1.3 billion to Eswatini Revenue Service (ERS).

A source close to the matter, said the University of Eswatini (UNESWA), which according to the Auditor General’s Compliance Audit Report for the financial year which ended March 31, 2021 and tabled in Parliament on February 18, 2022, was facing imminent risk of insolvency, had its income tax debt, which amounted to E1.3 billion, not cancelled by government.
The source said the administration of the institution of higher learning communicated the developments to its staff members through an internal memorandum, which was issued by the UNESWA Registrar, Dr Salebona Simelane, on Tuesday.

Cancelled

Through the memorandum, the registrar informed the staff members from the three campuses; Kwaluseni, Luyengo and Mbabane, on behalf of the university council, that government had graciously cancelled the huge debt of the institution to ERS. He added that as an administration, they were grateful to government for the kind gesture, which was a huge relief to the university. “The university is now able to remit income tax monthly to ERS,” the registrar said in the internal memorandum. The registrar confirmed the developments. He said indeed government had cancelled the university’s income tax debt to ERS, which amounted to E1.3 billion. He said following the cancellation of the tax debt, the university was able to pay income tax monthly to ERS. He expressed hope that they would maintain the momentum going forward. However, Dr Simelane highlighted that they had noted that there was a public assumption that government had given the institution money. He then clarified that government did not give the institution money, but it cancelled its income tax debt to ERS Therefore, he said the university still owed service providers and added that at the moment, the institution did not have money to pay them. However, he expressed belief that after the cancellation of the tax debt, the financial situation of the university would improve.

Response

The registrar was then asked how much the university owed service providers and in response, he said auditors were still on the ground working on compiling a financial report for the financial year ended March 31, 2023. On the same note, the Communications Officer in the Ministry of Finance, Setsabile Dlamini, said the agreement was that the university was to pay income tax faithfully for six consecutive months and its principal debt, penalties and interests would be written off. She said the university had paid the income tax faithfully for the past six months thus the debt was written off. On the other hand, ERS Director Communications and Marketing Vusie Dlamini said the issue related to a specific client and as a matter of policy and legislation governing the work they did, as ERS, they could not discuss matters involving their clients in public domain.It is worth noting that according to the Compliance Audit Report for the financial year which ended March 31, 2021, in terms of the the accumulated deficit and net operating deficit, the financial statements indicated that the university incurred a net loss of E189 172 410 during the year ended March 31, 2021. In the previous financial year, which ended March 31, 2020, the university had made a loss of E146 902 465. The report stated that as a result of incurring losses over the years, the university had an accumulated loss of E1 087 171 217 as at March 31, 2021. It concluded that this meant that the institution was spending beyond its income and, therefore, struggling to meet its obligations, hence depending (trusting) on the government to rescue it.

Again, in the report, the AG, Timothy Matsebula, highlighted that he noted that the university’s liabilities at that time amounted to E1 016 147 567 and it exceeded current assets, which were valued at E69 027 512 by E947 119 955. In that regard, the AG said he was concerned by the imminent risk of insolvency, wherein the institution might end up not having enough funds to repay required obligations and finance operational costs.On top of that, the AG said this scenario meant that the university could not pay off its liabilities without asking for an additional government subvention. Once more, in terms of outstanding employee tax (pay as you earn - PAYE) and value added tax (VAT) liability, the report highlighted that as at March 31, 2021, the university had not remitted total taxes amounting to E688 208 822 (excluding interest and penalties) to ERS. It said the unremitted taxes were in respect of statutory employee taxes (PAYE).

Unremitted

Furthermore, it said according to a Schedule of Outstanding Taxes Statement received from ERS, dated March 3, 2022, the university had VAT liability amounting to E2 627 412.27 relating to the tax periods from 2016 to 2018 and unremitted employee tax deductions of E906 910 135.20, relating to the tax periods from 2016 to 2021. The report highlighted that in response, the university’s controlling officer stated that the institution had always been open about its financial situation. It said the officer said a number of meetings were held with both government and ERS to discuss the UNESWA predicament. It was said that an application consistent with the provisions of the Swaziland Income Tax Order 1975 Section 61(16) was made to the minister of Finance to have the whole tax debt written off. Wherein the minister agreed to the interest charges write-off.

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