THERE ARE GOOD, BAD TAXES

SINCE government is all out in the 2018/19 financial year to tax as much as it can, perhaps a discussion on what constitutes good and bad taxes is most appropriate.

The way in which government raises and spends revenue has a significant toll on the economic and social development of a country. And while taxation is not the only source of government revenue, it is by a great margin the most important source of government income in Swaziland.

For example, in 2016/17 government generated about E9.1 billion from corporate income tax, personal income tax, and other taxes on income and profits. The other important form of tax revenue was taxes on goods and services of which VAT contributed about E2.4 billion.

Taxes can be a number of things. In layman terms, people tend to think of taxes as ways for government to raise quick money; but in reality, taxes also have an important role in deciding equity or fairness within the marketplace. In fact, taxes too, are a specific kind of law that alter ‘free market’ relationships and trade sometimes for the good and sometimes for not so good effects.

The truth is; in a free marketplace there is no room for taxes: agents and market forces decide what is good for them without any government intervention. However, without government taking money from your pocket, there probably would not be any roads, hospitals, stadiums, etc.

We would not be able to get passports to travel around the world, no police, nurses and teachers to provide us with the key education, health and protection services that they do. Nobody really likes taxes because people work hard for their money and it is hard to give it up even if it is to provide services for the greater good of society.

But what makes tax ‘good’ or ‘bad’ is whether that tax produces a service that is worthwhile and improves the standard of living for the greater masses. 

But here are some fundamentals we should understand about tax. In a free economy, money belongs to the people who earn it! To create the economic growth that is desperately needed, people must have money in their hands and in their pockets to buy goods, to invest, and to create jobs.

Those who tirelessly engage themselves in the business of generating money have a right to their money and even though they may be willing to give up some of it to pay for public goods, that does not give government an unlimited claim on their money to use as it sees fit.
Besides having no unlimited claim on our money, government is the worst entity to use our money. Private individuals and businesses use money more efficiently because they have a realistic touch and risk associated with the money. If more people have money in their hands than government does, money will do more good for the people.

What other possible avenues can government explore to generate income? Swaziland has a lot of state enterprises run as credible businesses. These include SPTC, SWSC, SEC, Swaziland National Housing Board, Motor Vehicle Accident Fund and National Maize Corporation, among others. These enterprises have the capacity to generate income and hence should contribute their fair share in filling government coffers instead of expecting subventions all the time. Not to forget the municipalities, they too generate income through property taxes, hence should pull up their socks in providing infrastructure and other public services within their jurisdictions.

There is the issue of scholarship money being recovered from those who benefited from the fund, when government was still offering study loans to a lot of high school graduates in Swaziland. Indeed, this money is owed to government and the beneficiaries should pay it back. However, the money should not be collected only to be rerouted to other activities other than funding scholarships to enhance our human capital in Swaziland. This is also similar to the ongoing TV licence campaign. Will government collect this money to provide relevant television broadcasting services or will we continue to be bombarded with dull TV programmes.

When you look at the services provided by the TV station, the tax is not worth it. Government also wants to add yet another tax on import vehicles, particularly used car imports from Japan and the likes. Already, SRA is collecting a lot of money through these used car imports, and because of these cars more people are mobile and able to run their own businesses besides the convenience of having a car. MVA is able to collect more fuel tax because more people are queuing up at petrol stations filling up their cars.

Government should not just tax simply because it can. Taxes can shrink the economy and alter consumer behaviours for better and for worse. There are no quick gains within the tax system. All money has to come from somewhere and government must respect and honour the people and businesses that work to generate that money. More money in people’s hands means more economic activities and consumption.

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