Writing off SOEs debts results in PAYE debt decline
MBABANE – The writing off of debts for state-owned enterprises (SOEs) has resulted in a decline in pay-as-youearn (PAYE) debt.
Some of the enterprises whose debt was recently written-off by government include, the University of Eswatini (UNESWA) and Eswatini Television Authority (ETVA).
The Eswatini Revenue Service (ERS) reported that as of March 31, 2023, the total debt stock was E7.422 billion from an opening balance of E9.171 billion.
There was a 40 per cent decline in PAYE debt from an opening balance of E3.043 billion to E1.214 billion, while VAT and company income tax debts grew to E4.400 billion and E1.633 billion respectively, during the year under review. The report detailed that the decrease in PAYE debts was attributed to the debt write-off for some SOEs as the entities struggled to honour their past obligations due to their financial circumstances and collection efforts had proved futile.
A decrease of 31.37 per cent was also noted in other withholding taxes debt and this could be attributed to the debt relief programme and other vigorous collection efforts that were undertaken in the year.
On the other hand, VAT debts remained high due to non-payments of audit assessed debts by companies who later stopped operating or relocated to neighbouring countries mainly in the import motor vehicle sector. The debt to tax revenue ratio as at the close of the year was 61.78 per cent against a target of 55 per cent.
Meanwhile, the ERS reported that tax arrears increased across all tax types, leading to an overall increase of 26.29 per cent in amounts owed by taxpayers. As of March 31, 2022, the total debt
stock was E9.171 billion from an opening balance of E7.262 billion.
There was a significant 172 per cent increase of ‘Other Withholding Taxes’ debts to E133.64 million, caused by assessed audits that were conducted on withholding taxes. PAYE and Income Tax debts also grew to E3.042 billion and E1.622 billion respectively.
PAYE faced pressure from non-paying public enterprises that were facing cash flow challenges, while VAT debts increased due to non-payment of assessed audits for import car dealers.
Debts under Personal Income Tax (PIT) also grew substantially by the end of 2021/22 due to individuals increasing declarations during this period.
The debt to tax revenue ratio as at the close of the year was 84.38 per cent against a target of 55 per cent. Debt collection strategies were developed and implemented during the year resulting in vigorous collection of debts.
The report further states that timely processing of refunds is important for businesses to ensure that their liquidity for day-to-day operations is not affected by then delayed payment of funds. A total of E1.628 billion was processed in refunds for 2022/23 of which 98 per cent were for VAT. In the quest to improve the paying taxes aspect on the ease of doing business index, 66.97 per cent of all VAT refunds were paid within 60 days as per the legislation.