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EVEN GOLIATHS FALL

28/02/2018 04:16:00 By Thabiso Dlamini

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THERE are lessons to be learned from our neighbour South Africa when it comes to balancing government coffers. Though institutions like the South African Revenue Service (SARS) and our very own Swaziland Revenue Authority (SRA) are instrumental in collecting tax revenue to fill government coffers, revenue collection targets are not always met.

This can have serious implications on the country’s fiscal position and economy as a whole. It is for this reason that South Africa is now in a scramble to increase VAT beginning of April 2018 due to a budget shortfall of R48.2 billion owing from SARS failing to hit its tax collection target.

Government cannot just keep increasing tax indefinitely when it faces financial shortfalls. Yes, tax can be an immediate solution to generate government revenue but in the long-run tax can also be the poison that increases the cost of doing business in a country and lead to a contraction or shrink to the total available businesses to tax.

Which is better? Taxing the system to exhaustion or finding a right balance between revenue generation and government spending so that it spurs other economic activities that can increase the tax base? The point here is that government cannot keep taking money from people and businesses just because it can. When government collects tax, that money should be reinvested in social and economic activities that will generate more money in the economy and improve the standard of living for the whole country.

Essentially, the purpose of tax revenue is to fund public goods and services (for example, education, health, and infrastructure) that individuals and businesses are not willing or able to fund. We need to have world-class service delivery in hospitals, schools, and when accessing services from the different government ministries.

For instance, there are plenty of public services that need funding in Swaziland: we need medications for treating HIV/AIDS; we need more government money going into building hospitals and schools instead of buying government a fleet of vehicles for civil servants to run down and pile-up at the CTO graveyard; we need more money to be directed to elderly grants; we need more money going to develop automation systems within government so that people do not have to wait in ridiculous queues day after day for a whole week just to get a Personal Identification Number and passports, among other basic services. Government needs to honour every business and individual that contributes money to the g-wallet and spend that money with the utmost care and responsibility to make Swaziland the great country that it can be.

For the last time, the Southern African Customs Union (SACU) revenue is no longer enough as a source of revenue for our government. SACU revenues have been a significant but volatile source of revenue for the Government of Swaziland, where customs duties on imports and excise proceeds between Botswana, Lesotho, Namibia, South Africa and Swaziland are pooled and shared between these member countries. SACU revenues have also been an important source of foreign inflows and contribute to stock of international reserves within these countries. In the past 10 years, the two small countries - Swaziland and Lesotho - have faced serious revenue volatility due to the highly unstable SACU receipts. The biggest hit in SACU receipts followed the 2008/09 financial crisis from which earnings for Lesotho and Swaziland dropped by almost half from an average 25 per cent of GDP in 2009/10 to 12 per cent in 2010/11.

During this period, Swaziland experienced a fiscal crisis while Lesotho, on the other hand, faced significant balance of payment needs, calling for International Monetary Fund (IMF) Extended Credit Facility to rescue the country. Yet again, SACU revenues continue to follow a downward trajectory in the 2016/17 period in Swaziland falling from about 16.1 per cent in 2013/14 to about 12.2 per cent of GDP in 2016/17.
The reason we should keep badgering on and on about SACU revenues is that it is already clear that the SACU pool of money is becoming smaller and smaller and our government has no other significant source of funds to keep the economy going here in Swaziland.

Government will at some point be forced to look for alternative sources of income and the easiest source of money will most likely be your pocket, including businesses in Swaziland. Every bit of activity in the economy will most likely come under the tax hammer, and even when that happens, government will continue to bleed money on things that do not add value to the economy. With such limited financial resources, every cent of the g-wallet counts, and government has to appreciate this new reality and start spending money where more money will be generated!