Responses to UN Questionnaire Fiscal and Tax Policy-Kingdom of
Swaziland
Taxation
1.
Revenue is around 34% of GDP this year, using our own GDP forecast of E37.612
billion. 2013/14 Budget: The total tax base is budgeted at E12.638 billion. Wealth taxes are
around E98m, domestic consumption taxes are around E2.584 billion and income tax is
around E2.798 including company tax of around E890 million. The majority of revenue
(E7.156 billion) comes from international consumption taxes (from the Southern Africa
Customs Union); the incidence is mainly on South African consumers. Consumption tax
(mainly VAT) rates are largely harmonized with South Africa, with zero rates for consumer
energy and some foods, among other areas. The PRSAP includes a commitment to introduce
a Revenue Authority (fully achieved) and introduce VAT (fully achieved). A large taxpayer’s
unit sits within the Revenue Authority. Information is not available by income level or social
group.
We have no readily available information on taxes paid by the relatively small financial
sector (around 3.3 percent of total value added) which is mainly composed of subsidiaries of
the South African sector, although their annual reports may help.
MEASURES OF FISCAL PRESSURE
TAX TO GPD RATIOS
Proportion in %
Tax to GDP Ratio (Excluding SACU)
19%
Tax to GDP Ratio (Including SACU)
Share of Income taxes in total revenue
36%
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Share of consumption taxes in total revenue2
31%
19%
FISCAL PRESSURE ON THE FINANCIAL SECTOR
Tax rates
Contribution of financial sector to total
The standard rate of 27.5% on taxable
income applies to financial sector
companies with no particular taxes
being specific to the financial sector.
Further financial sector services are
exempt as per the VAT Act which means
the financial institutions do not collect
VAT on behalf of the government.
5%
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Income taxes include PAYE, Corporate Tax, Other Taxes and Graded Tax.
Consumption Taxes are inclusive of taxes on goods and services and the above figure includes VAT/Sales Tax,
Casino tax, Fuel tax, road toll.
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revenue(Including SACU)
Contribution of financial sector to direct Taxes
20%
Taxes paid by the financial sector as a share of
GDP (Including SACU)
2%
Taxes paid by the financial sector as a share of
GDP (Excluding SACU)
7%
2.
The scale of the challenge of HIV/AIDS, a large wage bill and falling public
expenditure quality stemming from poor management of SACU revenues have all presented
challenges to adequate funding of poverty mitigation and ESCR resources. That said, health
and primary education expenditures are comfortably above the medians for LMICs.
Universal Primary Education is currently being rolled out for 2015 with the assistance of the
EU among others. There are no instruments to explicitly protect ESCR realisation from fiscal
instability, beyond specific project financing and grants, which are relatively low for SubSaharan Africa. However, if currently proposed reforms including the Public Finance
Management Bill were to be enacted, stability should improve. Tax collection is better than
in many countries in Africa, as shown by Tax Effort measures (World Bank), mainly due to
the SACU (South African Customs Union) allocation. It might be inferred that, given
relatively high tax take and regional integration restrictions on the revenue policy space,
improving the effectiveness of expenditures would be the primary source of the gains
necessary to realise ESCR.
3.
There are no specific mechanism designed to ensure that the design,
implementation and monitoring of tax measures comply with human rights principles.
However, to note is that despite delays due to the fiscal crisis and finding suitable office
space, the Human Rights Commission is in the process of being operationalised, and may
include specific monitoring of tax measures as part of its mandate. Currently, there are
explicit commitments to ESCR realisation in the Annual Budget on an annual basis, the
National Development Plan and the Poverty Reduction Strategic Action Plan. The PRSAP also
includes a commitment to review taxation policy in favour of low income groups. Policy is
being continuously reviewed on this matter.
IMPLEMENTATION AND MONITORING OF TAX INLINE WITH HUMAN RIGHTS PRINCIPLES
In addition, the tax system is equitable and does not discriminate the taxpayers. The income
tax law has thresholds which exempt least income earners and further those who earn low
income pay less tax than the high earners. Consumptions taxes also offer certain
exemptions and zero ratings for goods which are considered to be basic for the citizens thus
reducing the regressivity associated with consumption taxes. VAT exempts have basic food
stuffs, zero rates education services and exempt health. Administratively, ambiguity in tax
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laws is minimized, tax calculation made clear and revenue collected is appropriately
accounted and reported (annual revenue collections are subjected to annual audits). Also
there is a Taxpayer Charter which ensures transparency and fairness in the administration of
taxes. This charter includes the following rights for taxpayers:
a. To be presumed honest and compliant
b. To be treated with their legal rights and freedoms fully respected
c. To have access to information
d. To appeal or seek a review
e. To have privacy, confidentiality and for trade secrets to be safeguarded
f. To complain and to expect that their views will be heard and addressed
g. To request a payment plan
h. To have over payments of tax or duties refunded within 30 days.
4. INTERGOVERNMENTAL TAX COOPERATION AND TRADE AGREEMENTS
a. Inter-governmental tax cooperation
Swaziland has signed Double taxation agreements (DTA's) with South Africa, Taiwan,
United Kingdom, and Mauritius. These DTA's allow for certain tax rates to be levied on
income generated from either country. Also clauses on cooperation on tax information
exchange and measures to reduce tax evasion including transfer pricing are contained in
these DTA’s. Double Taxation Agreements with three SADC countries have been finalized
and are pending signature while two exchange of information agreements have also
been finalized (pending signature) with the State of Guernsey and Isle of Man. At
regional level, Swaziland has signed the SADC agreement on cooperation in tax matters
which allows for information exchange and assistance between member countries. The
country continues to pave similar agreements with other countries being more focused
at first on the SADC region.
b. International Investment or trade agreements
The country is a member of the Southern Africa Customs Union (SACU) in which
member of SACU have a common external tariff (CET). Based on this CET, member
states collect Customs and Excise duties from non-member countries and these are
remitted to a common pool and shared based on an agreed formula. At a regional
level the country is a member of the Southern Africa Development Community
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(SADC). Swaziland has ratified the SADC Protocol on Finance and Investment which is
a SADC agreement on Investment, Finance and Trade matters aiming at regional
integration including removal of tax and non-tax barriers to trade, harmonization of
monetary and of tax policies to avoid unfair tax competition. In the long term a
monetary union is being considered. SADC and the European Union are working
towards a full Economic Partnership Agreement.
Other memberships the country has entered include the derogated membership in
COMESA. Under the COMESA membership the country is allowed to export with
exemption from duties on domestically produced goods into COMESA but cannot
reciprocate the arrangement to the other COMESA countries.We are not aware of
any formal assessment of the extent to which these agreements impact on the
country to levy taxes.
Spending
1.
At present, planning and execution have no mandatory established process to
conduct gender and human rights monitoring of the Budget. Policy analysis is an evolving
area, with limited capacity across government. The operationalisation of the HRC is still in
process, which may provide enhanced oversight. Measures proposed under the draft PFM
Bill would enhance budget transparency. Policy is conducted with reference to MICS4 2010
results, and education monitor output by gender, age and rural status; the last survey was
conducted in 2010. The Intercensal exercise and a health sector exercise will aid efforts in
this regard, as well as recent engagement in the World Bank’s BOOST tool development.
2. The Government is forced to engage on cutting expenditure as fiscal crises emerge, as
over half of its revenue comes from a volatile SACU allocation. Social priorities, such as ARVs
and benefit payments are protected at the discretion of Cabinet during fiscal crises. The
Government has no readily available information in gender, rural or age divide of the
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budget, although the Government anticipates that the World Bank BOOST exercise will
strengthen capacity, as well as scoring of budget measures against the PRSAP.
Latest Budget 2013/14 (E13,112m expenditure)
N.B:
-
Health allocation was 11.3 %
Education was 20.1 %
Both of these are above median for LMICs.
Social Welfare was 5.3 %
Defence is 6.7%
Debt service is allocated around E980m including arrears repayments.
Execution rates past two years
2011-12
2012-13
(crisis)
Actual, % of Investment budget
Education
27%
115%
Health
49%
93%
Social
125%
116%
Total
61%
81%
Actual, % of recurrent budget
Social
81%
69%
Ministry of
103%
99%
Education
Ministry of
86%
97%
Health
Total
91%
92%
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