Impact of Ugandan expert support team
By Thabiso Nxumalo, Director of Tax RA (SD), MPhil. Tax, CFIP
The Minister for Finance, Neal Rijkenberg, has made a recent announcement that he has brought in experts from Uganda to strengthen VAT collection in the retail sector to curb tax fraud.
This has been done by the minister through the Eswatini Revenue Service led by the leadership of Brightwell Nkambule.
This is a move that has been deemed necessary by the minister, with evident concern of decline in VAT collection, especially in the retail and wholesale sector.
VAT FRAUD
In simple terms taxpayers need to understand that VAT is effectively set up in a manner that all qualified VAT vendors are essentially collecting this tax on behalf of the government and not for their benefit. This essentially means that as a business you calculate your costs and add your mark-up and thereafter, add VAT, which is to be remitted to ERS.
Most often when businesses receive these monies they then believe it’s their money and then do not want to remit it to the ERS. The withholding of this money for your own benefit as a taxpayer is fraud.
THE FAIRNESS OF VAT
The essence of VAT is not to put businesses at a disadvantage, but rather to promote fairness in the process. The mechanism of VAT allows all taxpayers not only to charge it, but rather to claim all expenses that they have incurred and were charged VAT. This, therefore, absolves the ERS of unfairness and transfers the responsibility of integrity to the taxpayers.
The belief of many taxpayers that VAT is their money, is the very reason that reduces the VAT collection for the ERS and amounts to fraud. This has adverse impacts for government as it is then its ability to deliver its services among other factors.
THE NEED FOR EXPERTS
This norm or belief among taxpayers has led to the design of different schemes to avoid VAT remittances, including fraudulent claims, unreported revenues and many others, causing detriment to the tax net.
The minister, through the assistance of the ERS leadership, has observed a gap in VAT collections, which need attention before getting out of hand. The retail and wholesale sector currently has been identified as major risks areas, which the experts have been engaged to assist government.
These are not only tax experts or audit experts but are also forensic experts. As a forensic auditor by profession, I am aware of the capabilities of the forensic auditors when they knock on your doorstep. The only words I can share with all taxpayers is there will be nowhere to hide once they come to you.
TAXPAYERS’ RESPONSE
Now the minister has introduced the kind of assistance that is coming to the country, my advice would be for all taxpayers to voluntarily disclose areas where there have been under-declarations to avoid punitive effects when the experts unearth all the abnormalities. As mentioned earlier, taxpayers must understand that VAT is not their money, it is the government’s money and should be collected and remitted as it should be. This is an opportune moment to engage the ERS as a taxpayer and invite them into your business to have a discussion on how you can best correct any inaccurate declarations that might have occurred in previous periods. This will assist in a more amicable resolution to any tax anomalies that might be brought to the table.
ENGAGING A TAX EXPERT
When an expert has been brought to the country, you need an expert to assist you as a taxpayer in putting your house in order. It is still a common misconception that accountants, auditors or lawyers can assist in tax issues.
Although they may have an understanding, they are mostly not specialists in the field. Every field has its own experts, and tax is no different. When one seeks medical advice from a graphic designer, they may not get the assistance they need, but when they find a doctor who specializes in the particular field, they will hit it in the nail.
COMPLIANCE A MUST
As long as you are conducting business in the country of Eswatini you cannot avoid the tax man. Whether in a democratic or non-democratic dispensation, tax is a major drive for the provision of necessary public services.
A sustainable business operation is one that seeks to be compliant to the local tax laws.
