GOVT SITS ON A BILL TO MAKE SD 'DUBAI'
Financial sector investors have approached government with the idea to turn the country into a SubSaharan Africa financial hub
With government struggling to improve its revenue base and already having experienced two sharp declines in the Southern African Customs Union (SACU) receipts within a space of five years and the recession being experienced by major economic partners, financial experts have approached the ministry of finance and the Central Bank of Swaziland with a proposal to turn the country into a international offshore financial centre.
In fact, the then minister of finance and now Governor of the Central Bank, Majozi Sithole is understood to have commissioned financial experts between the year 2000 and 2001 to develop an integrated custom-made legislation that would have seen the country becoming a global financial centre.
It is said that our failure to make our decision on the matter resulted in the idea being taken to Mauritius and has boosted its economy and is one of the reasons that make it one of the leading tourism hubs on the continent.
The idea was again pursued in 2011, this time around with a Bill being drafted in February 2011, which was to be known as an Act to regulate International Business Activities carried on within the Kingdom of Swaziland.
It was envisaged that the draft Act to regulate International Business Activities carried on within the Kingdom of Swaziland will function as the main Act, rarely requiring amendments or updates.
It further posits the legislation which will form the basis of the Financial Centre system will take the form of regulations, rather than laws, and will be able to be amended and updated as and when necessary.
The idea for the Bill was to make Swaziland the international offshore headquarters Hub for SubSaharan Africa.
The experts noted that at the time there was no other valid hub operating in Africa since Mauritius was strongly disapproved of by serious governments.
It further stated that Botswana and Namibia have not got off the ground. It predicted that an International Offshore Financial Centre will enhance financial strength and status of Swaziland.
It was said that the new legislative, regulatory and administrative framework would give the country a global face as an international financial hub.
In light of uncertainties within the region, in particular the developments in the Republic of South Africa and other Southern African countries, it was becoming urgent to proceed with this initiative by the country’s leaders to create Sub-Saharan Africa’s first true IOFC and to generate economic growth, social up-liftment and sustainable employment.
“In order to make Swaziland a desirable international investment destination and to achieve permanent social, economic and industrial empowerment for all income groups, it is essential to offer to a very discerning sector of the world’s investment community, all the best features to be found in any other jurisdiction, subject to the overriding requirement of full respect for the new international norms of financial and legal compliance,” the report stated. In the above respect they were talking to strengthening of antimoney laundering laws and financing of terrorism laws, things which the country has continued to improve. It further noted that Swaziland’s state-of-the art legislative and regulatory structure will achieve the following; Full respect for all international standards Concomitant benefits for Swaziland, South Africa and the Sub-Saharan region. “It is for the first time anywhere in the world that a new IOFC has designed its legislation with a full awareness of, and respect for, the international norms relating to non-abuse of the tax systems of other countries and the financial and legal standards set by the United Nations and the OECD. “In light of the inevitable concern and sensitivities that the governments of South Africa and other regional high tax countries would have in relation to a new international financial centre on their door step, great care has been taken to prevent potential abuse,” the document stated.
It stated that the Act provides for specific measures for the prevention of abuse by individual taxpayers of the benefits afforded under the Double Taxation Agreements concluded by Swaziland and its treaty partners.
Three success package elements for the IOFC were stated as; 1. A dedicated Authority 2. Prevention of abuse of Double Taxation Agreements; and
3. The right kind of international business structures
The functions of SIFAC
The document stated that the function of the Swaziland International Financial Centre (SIFAC) are:
(a) To regulate international business activities within Swaziland; and
(b) To certificate the right to conduct such international business activities within Swaziland
It is said that successful examples of a dedicated authority controlling offshore activities are to be found in Malaysia, Malta and Mauritius.
The main Act will establish SIFAC as the authority.
Role of SIFAC
SIFAC creates the regulatory and administrative framework to make the international financial hub work efficiently and profitably.
To this effect, SIFAC is granted those powers necessary to set up and run an IOFC in Swaziland, including the powers to charge the fees required to run the centre and to grant licences and certificates which enables SIFAC to control the operations and transactions carried on within the framework of the centre.
Administration and Regulation of SIFAC
Administration of SIFAC is by the board of Governors, consisting of a chairman, a vice-chairman and three other persons with wide business experience.
The board’s principal functions are as follows:
Determine policies and procedures;
Process applications for licences or certification;
Issue licences and certificates;
Prescribe and regulate the payment of fees for licences and certificates;
Determine the validity and duration of licences and certificates; and
Administer the centre The board will process the licensing and certification of international trusts, international business companies, international coordination centres, international information technology centres, international captive insurance companies, international liability companies, representative offices of foreign banks and mutual funds.
SIFAC determines its own internal regulation and may delegate powers.
All related documents and other information are confidential insofar as this not override certain other legislative provisions, in particular relating to anti-money laundering. Making the financial centre work All of the following elements will have to be brought into operation, with the necessary cooperation between SIFAC and the Government of the Kingdom of Swaziland: Administration of the financial centre Marketing of the Kingdom as a financial centre
Assisting in the conclusion and functioning of double taxation agreements
Creation of the right kind of international business structures
Training and education of Swaziland nationals in the operation of the Financial Centre Importance of regulating the issue Swaziland has maintained the traditional tax system whereby taxpayers are taxed on their domestic source income. In 2011 South Africa changed its tax system in favour of a residency based system under which South African residents are taxed
INIATOR: Governor of the Central Bank, Majozi Sithole.
AWARE: Ministry of Finance Principal Secretary Bheki Bhembe.