2010年-世界发展银行全球_Enhancing_Non-SACU_Revenue_in_Swaziland___Improving_Tax_Policy_and_Administration_30页_439kb

Summary of Enhancing Non-SACU Revenue in Swaziland

Core Content

This policy note outlines strategies to enhance non-SACU revenue in Swaziland to address the fiscal challenges arising from the collapse of SACU (Southern African Customs Union) revenues in 2009. The goal is to ensure the sustainability of development policies and reduce the reliance on SACU revenues, which are expected to decline further in the coming years.

Main Objectives

• Improve tax policy and administration to increase non-SACU revenue.
• Align tax policies with South Africa to ensure consistency and facilitate investment.
• Address the fiscal emergency by implementing reforms that enhance revenue collection and reduce spending.

Key Recommendations

Tax Policy Improvements

• Replace Sales Tax with VAT: Introduce a 14% VAT to avoid arbitrage opportunities with neighboring countries, demonstrate commitment to tax obligations, and prevent lobbying for lower tax rates.
• Phase out Development Order Tax Credit: Except for exceptional cases like Coca-Cola, these credits are not effective in attracting long-term investment.
• Set Fees at Cost-Recovery Levels: Increase fees for motor vehicle licenses and liquor stores to cover administrative costs. Eliminate the cattle and dog fees, and abolish the graded tax or transfer it to local governments.
• Increase Certain Taxes: Raise fuel tax by E1 per liter and increase the gaming tax to 15%. Consider introducing a capital gains tax on business assets.
• Implement Thin Capitalization Rules: To prevent excessive interest deductions and reduce the perverse effects of tax-free interest.

Revenue Authority Launch

• Establish a Large Taxpayer Unit: Focus on high-value taxpayers and ensure sophisticated tax engineering.
• Automate Communications and Audits: Improve efficiency and accuracy in taxpayer interactions and data collection.
• Enhance VAT Administration: Create dedicated VAT accounts for accredited exporters and integrate VAT systems with South Africa's for economies of scale and data consistency.
• Apply Withholding Principles Broadly: Facilitate easier enforcement by focusing on easily monitored tax subjects.
• Limit Discretion in the RA: Reduce political interference and ensure consistent enforcement.
• Start Training Tax Administrators Immediately: Prepare staff for the new VAT system and improve overall tax administration capabilities.

Key Information

Fiscal Context

• SACU Revenue Decline: SACU revenues dropped in 2009 and are projected to remain at 11% of GDP for the next three years, down from an average of 22% during 2004–2009.
• Non-SACU Revenue: Non-SACU revenues have averaged 13.3% of GDP since 1999, reaching 14.7% in FY2009/10. However, they are still below the levels of other countries with similar economic profiles.
• Spending Challenges: Expenditures reached 43% of GDP in FY2009/10, and the government faces a deficit of around 10% of GDP unless new measures are introduced.

Tax Policy Issues

• Debt Financing Bias: The current tax system favors debt financing over equity, reducing the effective tax burden on debt-financed investments.
• Income Tax Design: Swaziland's income tax has a dual structure, with a progressive rate for individuals and a flat rate for capital income. It is more favorable to certain sectors like farming, manufacturing, and hotels.
• Capital Gains Tax: There is no capital gains tax, which may be a distortion in the tax system.
• Tax Incentives: The tax incentives, including the Development Order, significantly reduce the effective marginal tax rate, which may not be justified by the social returns of the investments.
• Tax Enforcement: Penalties for noncompliance are high, but the level of discretion in their application is a concern.

Expected Revenues

The following table provides an estimate of the additional revenue expected from the proposed reforms (as a percentage of GDP):

Conclusion

Swaziland's tax system needs to be reformed to improve revenue collection and reduce distortions. The proposed changes aim to create a more neutral, efficient, and sustainable tax environment. These reforms are critical for the country to become financially self-sufficient and to support its development goals in the absence of SACU revenues.