EZULWINI – Members of Parliament (MPs) have expressed strong support for the urgent ratification of an international convention aimed at curbing illegal financial outflows from the Kingdom of Eswatini.
The call was made during a workshop for MPs on the ratification of international legal instruments, held at the Happy Valley Hotel and Casino.
Senior officials from the Ministry of Finance delivered presentations on key conventions requiring ratification, including the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
Making his presentation, Ministry of Finance Legal Advisor Henry Sukati explained that the convention seeks to address challenges associated with tax base erosion and profit shifting, particularly by multinational corporations.
“We must not tolerate a situation where profits generated within our borders are shifted elsewhere to avoid taxation,” Sukati said.
He noted that some investors, although operating in Eswatini, transfer their profits to other jurisdictions where they maintain branches, effectively avoiding tax obligations both locally and abroad.
“In such cases, investors end up not paying tax in Eswatini or in their home countries, resulting in what is known as double non-taxation,” he explained.
Sukati said the proposed convention would enable Eswatini to enter into agreements with other countries, allowing for cooperation in monitoring financial flows and addressing tax avoidance practices.
“This issue was also raised during the Global Forum, which comprises 174 countries. Member States agreed to work together, scrutinise financial transfers and alert one another when there are breaches,” he added.
He emphasised that such cooperation would significantly benefit the country, particularly in light of growing concerns over untaxed funds leaving Eswatini. Sukati made reference to recent reports by the Eswatini Revenue Service (ERS) which indicated that approximately E4 billion has been transferred out of the country without being taxed.
“It is unfortunate that at the time, the figure stood at around E4 billion, but there is a strong possibility that it has since increased,” Sukati said.
He expressed optimism that ratifying the convention and entering into binding treaties would strengthen the country’s ability to safeguard its revenue.Sukati also highlighted past instances of ‘treaty shopping’, where investors exploit existing agreements between countries to minimise or avoid tax obligations.
He further explained the concept of artificial avoidance of permanent establishment status, where investors deliberately structure their stay in the country to evade tax liability.
“In some cases, individuals remain in Eswatini for up to 90 days, then leave to avoid being classified as tax residents, only to return later and continue their activities,” he said.Sukati added that the convention would also help curb revenue losses arising from tax avoidance schemes, including cases where investors operate informally while residing in hotels and conducting business without proper registration.
“This instrument will strengthen our ability to detect and prevent such practices, ensuring that all economic activities conducted within our borders are fairly taxed,” he said.
MPs attending the workshop acknowledged the urgency of ratifying the convention, noting that it would enhance transparency, improve compliance and protect the country’s revenue base.
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Members of Parliament during their workshop o the ratification of international legal documents on Thursday. (Pics: Ntombi Mhlongo)