MBABANE – The Revenue Appeals Tribunal Eswatini (RATE) has delivered a decisive victory to a popular hotel and casino establishment at the Ezulwini Valley.
The ruling set aside a E10.6 million tax assessment, plus associated penalties and interest, brought by the Eswatini Revenue Service (ERS).
The case, which pivoted on the narrow, but crucial interpretation of a single phrase in the country’s Income Tax Order, clarifies the legal distinction between a deductible business expense and a non-deductible tax or levy.
The tribunal’s detailed findings have confirmed that certain regulatory charges, even if substantial, fall outside the administrative jurisdiction of ERS and are, therefore, allowable deductions for income tax purposes.The appeal concerned the deductibility of the ‘casino levy.’
This levy is a statutory charge imposed on casino operators under the now-repealed Casino Act, 1963 (and subsequently the Gaming Control Act, 2022).
The popular hotel and casino establishment, a major employer and tourism anchor, had consistently deducted the levy payments from its taxable income for the 2021, 2022 and 2023 tax years. Following a desk audit, the ERS raised a new assessment, disallowing these deductions.
The ERS argued that the casino levy constituted a levy that, according to Section 15(1)(e) of the Income Tax Order of 1975 (ITO), was absolutely non-deductible.
The resulting total liability – including additional tax, penalties and withholding tax – exceeded E3.4 million, making the appeal a matter of significant financial consequence for the establishment.
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… casino levy collected by Gaming Board, not ERS
MBABANE – The appellant establishment formally objected, pointing out that the levy is imposed under the Casino Act and collected by the Gaming Board, not the ERS.
In a highly unusual move, the ERS’s objection decision abandoned its initial factual claim and shifted to a purely grammatical interpretation of the ITO.
The respondent argued that the phrase in Section 15(1)(e) – which states a deduction shall not be allowed for ‘normal tax or levy and any interest or penalty payable in consequence of the late payment of any tax or levy payable under any Act administered by the commissioner’ – was structured in a way that the restrictive qualifier, ‘payable under any Act administered by the commissioner,’ only applied to the penalties and interest.
Under this reading, ‘normal tax’ and ‘levy’ were non-deductible absolutely, regardless of which government body administered them.
The tribunal, while ultimately basing its decision on the substantive law, found the respondent’s change of basis – shifting from a factual error to a fresh legal interpretation after the appellant had lodged a specific objection – to be a procedural irregularity that violated principles of fairness and legal certainty in tax administration.
The appellant’s legal team launched a robust defence, centred on two key principles: The general deduction formula and the strict interpretation of prohibition.
Firstly, they argued that the casino levy met the fundamental ‘production test’ under Section 14(1) of the ITO. This section allows the deduction of any expenditure ‘actually incurred in Eswatini by the taxpayer in the production of his income.’
Citing local and international tax jurisprudence, the appellant successfully argued that the levy was not a consequence of having produced income, but rather a prerequisite—a statutory condition for maintaining the licence required to generate any gaming revenue.
*Full article available in our publication
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