TAX RELIEF FOR SUPPLIERS OWED BY GOVERNMENT

MBABANE – Businesspeople who are owed by government will now enjoy a tax relief in the form of deferred payment.

This is incorporated in the Income Tax (Amendment) Bill, 2022, which was passed in Parliament in the last sitting of the outgoing Members of Parliament (MPs), which was held last week Monday. According to a communication from Senate on the Bill, they informed the minister that there was an outcry, as businesspeople were taxed for money they did not get and most of these companies were owed by government. The communication was prepared by the Portfolio Committee for the Ministry of Finance, which is chaired by Senator Tony Sibandze. In response, the minister made an undertaking to establish a memorandum of understanding (MoU) with Eswatini Revenue Service, that would relieve businesspeople that are owed by government.

Appreciated

Johannes Manikela, the Chairperson of the Federation of Eswatini Business Community (FESBC) in the Hhohho Region, said they appreciated the developments from Parliament, as this was a thorn in their flesh. However, he shared that the real issue should be ensuring that government paid its suppliers on time because it was not just the issue of ERS that was a concern to them, but they ended up in lawsuits with the companies they procured from for delayed payments. He said government should pay at least within days of getting the service to enable the flow of money. “As much as we appreciate the relief for owed businesses, we can’t shy away from the real issue, which is getting paid by government on time. When a business gets an order, the assumption is that the money to pay for that order is already there and it boggles the mind when the payment is delayed for over six months and it is a big inconvenience for the businesspeople who have many other responsibilities to service with the money,” he shared. 

The Bill seeks to broaden the tax base and to protect it by minimising the erosion of the tax base. The Bill introduces a number of revenue enhancement measures aimed at generating additional revenue for government. These revenue enhancement measures, according to the communication from Senate, are in the form of strengthening of certain administrative provisions that need to be improved. The Bill is also introducing the concept of taxation of worldwide income, subject to relief from judicial double taxation. At present, tax in Eswatini is source based and this amendment would extend Eswatini’s jurisdiction to tax the foreign source income of residents.

Under the proposed new law, Eswatini would asset jurisdiction to tax all residents on their worldwide income with relief from international tax generally provided by way of a foreign tax credit. “The gross income of a resident would include income from all sources, while a non-resident taxpayer would be subject to tax only on Eswatini source income. This amendment would also cater for the inclusion in gross income of any disposal of a business asset. Since taxation on worldwide income is being introduced, there is a need to introduce a provision that would cater for unilateral relief from double taxation,” reads the communication.  Senators also informed the minister that it was concerning that small and medium enterprises (SMEs) were taxed. They further requested the minister to consider reviewing the turnover to E100 000. In response, the minister informed senators that currently, there was no relief for SMEs.

Study

The minister further informed senators that a study was done, wherein the economist recommended E41 000, however, government decided to increase it to E50 000. Senators also advised the minister that he should consider reducing the tax for retiring natural persons, considering that these people had worked and contributed to the country’s economy for all the time they spent at work. Senators further recommended that the income rates for retiring persons be reviewed as follows: from E0 to E330 000 be reduced from 25 per cent to 20 per cent and above E330 000 be reduced from 30 per cent to 25 per cent. Senators strongly enquired as to how the ministry arrived at a decision of increasing pay-as-you-earn (PAYE) from 33 per cent to 36 per cent, considering the high inflation the country was currently faced with.

They informed the minister that he should take into account that Parliament had recently passed tax Bills, inter-alia Alcohol and Tobacco levy, Fuel Tax and VAT. “It is based on the aforementioned reasons that senators objected to the increase and urged the minister to reconsider the decision of increasing PAYE,” reads the communication. In response, the minister informed the committee that the aim was to reduce the gap between the poor and rich people, however, due to the prevailing economic situation; the ministry had reconsidered its decision.

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