GROW THE ECONOMY, NOT INCREASE TAXES

The major talking point of this year’s budget is the increase in value added tax (VAT) to 15 per cent. There was no compelling reason for the authorities to have done so unless, of course, it was to ‘keep up with the Joneses’.

South Africa increased VAT to 15 per cent because of corruption and the maladministration of the economy.
It is rather a corruption tax. That’s what it is. Does it mean that Swaziland suffers from the same malady of corruption which has resulted in the gratuitous increase in VAT? Would Swaziland have increased VAT if South Africa had not done so?

It seems to me that the obvious answer is no. 
According to the World Bank, per capita income in Swaziland as of 2016 was US$2 770 compared to US$5 275 for South Africa.
Consider further context. South Africa has a population of 56 million people and Swaziland has about 1.1 million.

In the 2016/17 collection year, 19.9 million individuals paid income tax in SA (36% of country’s population) versus 30 242 individuals in Swaziland (representing three per cent of the country’s population); pay-as-you-earn affected 489 445 individuals in SA and 367 individuals in Swaziland. The tax base in Swaziland is too narrow. To grow it, the economy needs to grow.  The bigger and persistent risk with the budget is that 43 per cent of revenue is from the Southern African Customs Union (SACU). While this is lower than the 49 per cent of 2016/17 fiscal year, it still presents a risk.

Diversification of revenue sources is both an economic as well as a political imperative. It is a matter of urgency that Swaziland explores other sources of revenue.
And the easiest way to do this is by growing the economy not higher taxes.

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