Govt to introduce capital gains tax

Minister of Finance Martin Dlamini said the proposed revenue measures would assist government in mobilising additional resources for protecting essential services while Southern African Customs Union (SACU) revenues fall in the medium term.
He said these initiatives include an amendment of the Income Tax regulations, including removal of the tax allowance exempting gains on the disposal of business assets.
Swaziland Revenue Authority (SRA) Commissioner General Dumisani Masilela said capital gains taxation was normal in other countries and it would be introduced incrementally in Swaziland.
“Assets depreciate over time and in the books of accounts the value is deducted from income, but when you dispose of the asset it now becomes a capital gain, which is taxed in other countries,” he said in an interview after the presentation of the national budget speech.
Meanwhile, African Alliance Partner Sthofeni Ginindza said he had been expecting the minister to say more on capital gains tax. “We should have capital gains taxation by now so as to increase revenue,” he said.
In South Africa, capital gains tax for legal persons is 66.6% of their net profit and for natural persons it is 33.3%; this portion of the net gain is taxed at their marginal tax rate. As an effective tax rate this means a maximum effective rate of 13.3% for individuals is payable and for corporate taxpayers a maximum of 18.6%.

‘Sin tax’ not a new phenomenon in SD

Swaziland Revenue Authority (SRA) Commissioner General Dumisani Masilela says ‘sin tax’ is not new in Swaziland.
He said prior to the introduction of value-added tax (VAT) in 2012, the sales tax rates were different for various commodities; alcohol and tobacco were taxed at 20% and 30%, respectively.
“When we introduced VAT we decided not to pervert it and not have multiple rates but only two – 0 and 14%; there was a desire to continue to apply ‘sin taxes’ so a Bill was crafted to introduce these levies, but then a decision was taken to suspend it and monitor our collections,” he said.
Masilela said they had now looked at what other countries were doing and found that most were still applying ‘sin taxes’. “We think now is an opportune time to re-introduce the levy on alcohol and tobacco. The minister will be bringing back the legislation for review in parliament,” he said.
Government says it is losing about E60 million per year in revenue that could otherwise be accrued from ‘sin tax’.
Minister of Finance Martin Dlamini said the purpose of the levy was to augment the revenue loss from applying a lower rate of VAT on these products as compared to the historical sales tax rate.
“Consumption of alcohol and cigarettes has significant public health effects. It is right to try to influence customers’ behaviour through taxation,” he added.
University of Swaziland (UNISWA) Economics Lecturer Christopher Fakudze said in a constrained economy such as Swaziland, an anchor-hold should be levies and price stabilising mechanisms.
“In my opinion, the minister has been able to dispense a fiscal envelope whose impact is better than it could have been without,” he said.
Economist Thembinkosi Dlamini also said more harsh increases in sin taxes and excisable goods such as alcohol, cigarettes and others were welcome. In addition to that, he said reinforcing crucial information and disclosure aspects of Swaziland’s tax system was needed to counter tax evasion and avoidance.

SRA: You will not be double taxed

The Swaziland Revenue Authority (SRA) says the proposed tax amendments will not result in double taxation.
Government is also looking into introducing, among other reforms, the taxation of residents on their worldwide income. Currently, residents are taxed depending on source, meaning that tax is imposed on income generated within Swaziland only.
“This has a limitation in that there is a growing trend of Swazi residents (including individuals and companies) earning income beyond our borders. Increasing tax justice is an idea whose time has come. Our neighbours, including South Africa, have already shifted from source-based taxation to worldwide taxation,” noted the minister.
SRA Commissioner General Dumisani Masilela explained that there were two principles of taxation; source-based and resident-based. He said countries that started at source-based taxation were now mostly moving towards resident-based taxation, which combines with the former. “Money made in other countries must be taxed, but we need to work on Double Tax Avoidance Agreements if we introduce the resident-based system,” he said when asked if this would not result in double taxation. Double taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). This double liability is often mitigated by tax treaties between countries.
Many countries have agreed with others in treaties to mitigate the effects of double taxation (Double Tax Avoidance Agreement). These may cover income taxes, inheritance taxes, value added taxes and others. Tax treaties tend to reduce taxes of one treaty country for residents of the other treaty country in order to reduce double taxation of the same income. Asked on how the revenue authority would ensure compliance, Masilela said they would mainly rely on voluntary compliance. However, he said they would also be monitoring residents’ incomes through third party data sources.
Meanwhile, an analyst said double taxation cannot be avoided at times, but it can be cushioned through taxation agreements between cooperating states. “Income earned outside Swaziland will have to be declared. Even currently, taxpayers are expected to declare their income – whether derived locally or externally – the only difference is that it’s not taxed,” he said. “Unfortunately, double taxation cannot be avoided at times, but sometimes countries have agreements with their counterparts where they agree on a low tax rate for resident-based taxation.”