9th Parliament politicians demand millions

“Government at loggerheads with politicians who formed part of the 9th Parliament as they have come out to demand money they claimed was erroneously taxed from their terminal benefits.

MBABANE – In what can be termed a controversial twist government is currently at loggerheads with politicians who formed part of the 9th Parliament, as they have come out to demand money they claimed was erroneously taxed from their terminal benefits.

The former politicians are said to be demanding the money on grounds that their pay was taxed despite that Finance Circular No.1 of 2010, which was the instrument used to pay them their terminal benefits, including severance grant and pension, provided it was not supposed to be taxed.

The members of the 9th Parliament include the likes of Macford Sibandze, Ntuthuko Dlamini who is currently in jail and former minister Lutfo Dlamini.

Judging by the fact that the 9th Parliament was made up of over 60 politicians who included Members of Parliament (MPs), senators and Cabinet ministers, the money they are demanding is over E200 000 each.

Those who were Cabinet ministers are said to be demanding over E300 000 each.

If they are to be eventually paid, government will have to fork out over E15 million.

TROUBLE STARTED

The Times S8NDA< gathered that trouble started late last year, when some of the former legislators got wind that one of their colleagues, former .ubuta MP Charles Myeza had demanded the money and was allegedly refunded.

Myeza is known for having been jailed for five years after the High Court found him guilty of fraud, which was committed between the years 2004 to 2005.

The Times S8NDA< has been following up on the matter and called Myeza on January 18, 2024, whereby he asked not to say anything as the matter was sensitive.

Myeza said he did not want his name to be mentioned anywhere in relation to the case in point.

He said when the time is right, he will talk about the matter.

“For now I reTuest not to say anything. I will tell you when I am ready to detail everything on what really happened,” Myeza said, after which he advised this reporter to engage Parliament authorities to get more details.

At the time, Clerk to Parliament %ennedict ;aba, who ironically also formed part of the 9th Parliament, said a meeting was yet to be convened with the former legislators and that it was premature to share the details.

Having heard the reports that Myeza had allegedly received the money, the former legislators are said to have mobilised and agreed that they should approach the relevant authorities.

CLAIM FORMS

In December last year, they are said to have elected a committee to work on the issue after which three letters were written to the Minister of Finance, Neal Rijkenberg.

They also made visits to Parliament to fill up the necessary claim forms to demand their money.

This publication has seen one of the letters written by the committee and it is dated December 18, 2023.

Part of its content reads “We hereby demand that the accrued severance grant provided for in Clause 7 (a) of the Finance Circular No. 1 of 2010 be paid to us without being subject to tax in accordance with the dictates of the said Finance Circular.”

It reflects that the two other letters were dated December 4 and 5, 2023 and that the need to craft another one was aimed at offering a clarification and amplification on the issue at hand.

The former politicians argued that it was common cause that the Finance Circular No.1 of 2010 provided for terms and conditions of service for politicians.

They said the circular had always been binding to the *overnment of Eswatini.

Reference was made to Clause 7 (a) of the circular which states that, “On leaving office at the end of the parliamentary term, parliamentarians need time to arrange their affairs and re-enter the formal employment market or focus on their personal businesses. Parliamentarians shall receive a severance grant on leaving office. This will not be taxable.”

LUMP SUM

They said in accordance with Clause 7 (b), this was in addition to the pension fund lump sum payment.

According to the former legislators, as per the contents of the letter, it was their understanding that the non-taxable severance grant contemplated in the aforesaid circular was the compensation and or benefits that government provided to politicians after the parliamentary term was over.

They said severance packages may include extended benefits, such as outplacement assistance to help an employee secure a new position. Also, the former politicians said the severance grant provided in Clause 7 (a) of the circular was a commitment on the part of the government to provide the politicians with a buffer between working and unemployment, which meant that it was a right which could not be postponed.

They argued that the expression ‘received by or accrued to or in favour of’ was an element of gross income, as so defined in Section 7 of the Income Tax Order 1975 (as amended), and it refers to receipt and accrual.

ENTITLED

“The words are stating two important concepts relevant to income tax ‘received by or accrued to’. This is mainly related to time, and will establish the particular year of assessment in which the gross income arises. Accrual takes place when the person becomes unconditionally entitled to the amount. For the sum to accrue to a person there must be a clear and enforceable right to receive the money, the taxpayer’s right to claim must be unconditional. ‘Accrued to’ refers to money that becomes due to that person but not yet paid,” reads part of the letter.

The letter goes on to state that in the case at hand, accrual took place at the end of the parliamentary term, which is when the politicians became unconditionally entitled to the amount.

They mentioned that it was at the end of the parliamentary term when the parliamentarians had a clear and enforceable right to receive the money (the non-taxable severance grant).

UNCONDITIONAL

“We can emphatically state that the sum of non-taxable severance grant has accrued to us as our right to claim is unconditional. Hence, we are fortified in our opinion that it is imperative for the government to fulfil its obligations under Clause 7 (a) as per the stated terms and conditions of service, and not subject the severance grant to normal tax (income tax),” it was mentioned in the letter.

The former legislators mentioned that government had no choice or discretion in this regard and that as

an employer could not seek to change the terms and conditions of service for politicians at the end of the parliamentary term or when the parliamentary term ended, as that would be tantamount to acting in bad faith.

They said they would not like to believe that His Majesty’s government could intentionally act mala fide.

“We hold the view and it is actual our fervent belief that the bona fides of the government were always beyond reproach when it set such terms and conditions for service of politicians as finally expressed through the circular,” the letter mentioned.

Another argument brought forward by the former legislators was that

Clause 7 (a) of the aforementioned circular was not in conflict or inconsistent with Section 12 (1) (j) (iii) of the Income Tax Order for a variety of reasons.

One of the reasons brought forward was that the Second Schedule to the Order defined the terms ‘employee, ‘employer, and ‘employment’.

The definitions the former legislators said, were relevant to the taxation of remuneration (employment income) under the Order and the Second Schedule.

The term ‘employee’, according to the legislators, meant any person (other than a company) who, in respect of an employment, receives remuneration from an employer or to whom remuneration accrued.

APPOINTMENT

“The central definition is that of ‘employment’. The term employment is defined broadly to mean employment as that term is generally understood and to the holding of any office or appointment,” argued the former politicians.

Elaborating, they mentioned that paragraph one of the Second Schedule to the Order defined ‘employment’ to mean the position of an individual in the employ of another person; or a directorship of a company; or a position entitling the holder to a fixed or ascertainable remuneration; or a public office.

In their argument, the former legislators said paragraph (a) of the definition covered the ordinary meaning of employment and, therefore, existing judicial authorities on whether there was an employee or employer relationship were relevant.

The other paragraphs, it was argued in the letter, covered office holders.

The former legislators made reference to Section 2 of the MOPA'O Act, 2013, which defines the term ‘retirement’ to mean termination of membership of Parliament and termination of appointment to office in the case of a person who is a holder of a designated office.

They argued that Section 12 (1) (j) (iii) of the Income Tax Order exempted from normal tax, any amount received or accrued to an employee on bona fide termination of employment in respect of an amount payable, as determined in terms of the Employment Act, as severance allowance.

In their view, the severance allowance contemplated under this section of the Order is severance required to be paid to an employee under Sections 34 and 36 (k) of the Employment Act.

They said in terms of the said sections, the categories of persons to whom severance shall be paid included those who were retired in terms of Section 36 (k) of the Employment Act, having reached the normal age for retirement in the undertaking.

This, they said, was because such an employee has attained the age which in the undertaking in which he was employed was the normal age for employees holding the position that he held.

DECLARED REDUNDANT

Others, the former legislators said, were persons who were declared redundant in accordance with the provisions of the Employment Act, plus those who were awarded severance by the Industrial Court in terms of the Industrial 5elations Act, where the court had held that the services had been terminated unfairly.

They said it was their submission that the severance grant fell squarely within the category that was exempt from income tax, in light of the definition of ‘retirement’ occurring in Section 2 of the MOPA'O Act, 2013.

This, they said, was because in terms of the said definition retirement in the case of an MP was the ‘termination of membership to Parliament’.

The former legislators also brought up an argument to the effect that In accordance with Section 2 (3) of the MOPA'O Act, 2013, a member shall have an option of converting the entire lump sum into pension or commute up to a maximum of one-third cash lump sum with the balance of two-thirds purchasing pension.

This, they argued, was what was referred to in Clause 6 (d) of the )inance Circular No.1 of 2013, which stated that; ‘at the conclusion of the term of office, one-third of the benefit was payable as a lump sum’.

The balance, the letter states, became a pension payable upon the member reaching the age 55.

Presumably, the former legislators said the gratuity being referred to was the one-third commutation of pension as contemplated in both the Act and the finance circular, which in terms of the relevant provisions of the Income Tax Order was treated in a specific manner for purposes of income taxation in Eswatini.

On key importance in the provisions, according to the former legislators, were the lump sum payments from pension funds.

“Section 12 (1) (j) (i) of the Income Tax Order exempts from normal tax any amount received by or accrued to an employee on bona fide termination of employment in respect of commutation of a pension payable from a pension fund,” the former legislators claimed.

Another key feature they articulated was touched on, was what was expected to happen on retirement, whereby they cited that commutation of a pension, to be free of taxation, must not represent more than one-third of the total value of annuity to which any employee becomes entitled.

SINGLE PAYMENT

That is, only one-third of the total value of an annuity may be commuted for a single payment.

They said this exemption, however, must be read with the provisions of Section 2 (as regards the definition of a pension fund).

The section reads: ‘Where any amount commuted is in excess of one-third of the total value of the pension payable as a lump sum, the excess will fall into gross income and will be taxed under Section 7 (c) of the Order.’

It also stipulates that, ‘Where the annual amount of such annuity or pension payments does not, in total exceed One Thousand )ive Hundred Emalangeni, then such payments are also exempt from normal tax in terms of the law’.

In their final point, the former legislators strongly argued that the one-third lump sum commutation from pension should not be confused with the monthly pension derived from the two-thirds pension.

Instead, they said, the one-third commutation was exempt from tax in accordance with Section 12 (1) (j) (i) of the Order, but the monthly pension flowing from the two-thirds was taxable and therefore subject to pay-asyou-earn (PA

TAXED

When called yesterday, ;aba said he could not comment at this stage, as the matter was now being handled by the committee.

Meanwhile, one of the former legislators who spoke on condition of anonymity insisted that the circular was clear on the ex-gratia component that it was not to be taxed, which meant that government had to make the provision.

“The bone of contention is that we received the ex-gratia but it was taxed. This circular was unique and that is why we are demanding the money,” he said.

MADE AN ERROR

Meanwhile, a tax expert opined that government might have made an error when crafting the circular.

“I am of the belief that the law that the E5S uses overrides the circular. It is good for government to make a facility that will ensure the payment of benefits of politicians but in this case, it appears that this was a policy that contravened the tax laws,” he said.

(File pic) The Parliament of Eswatini. Former politicians of the 9th Parliament are said to be demanding the money on grounds that their pay was taxed despite that Finance Circular No.1 of 2010, which was the instrument used to pay them their terminal benefits, including severance grant and pension, provided it was not supposed to be taxed.