Africa-Press – Eswatini. Minister of Finance Neal Rijkenberg has announced a significant reduction in the country’s corporate tax rate, aiming to stimulate investment and foster business growth within the country.
This move as announced by Rijkenberg when delivering the National Budget in Parliament yesterday. The move comes as part of the recently-announced Income Tax Order Amendment, 2023, which will take effect on July 1.
According to the minister, the amendment introduces a reduction in the corporate tax rate from 27.5 to 25 per cent.
“This legislation brings changes that will improve effectiveness in administration while simultaneously providing relief to businesses,” said Rijkenberg.
This decrease in the tax burden aims to achieve several positive outcomes, such as attracting new investment, encouraging existing businesses to expand while enhancing the country’s competitiveness.
“This is a move that we believe will stimulate new investment and encourage the growth of existing investments,” he said.
Rijkenberg indicated that the Income Tax Order Amendment, further promises a thorough overhaul of specific tax provisions with the intention of streamlining processes, while simultaneously offering incentives aimed at boosting the overall economy.
“The review of capital allowances, introduction of capital gains on business assets and provisions on transfer pricing are among the main changes that the Income Tax Order Amendment is bringing. Overall, these changes will improve efficiency in tax administration, while providing relief that will encourage economic growth,” said the minister. According to economists, this is to say businesses operating within Eswatini can expect a detailed re-examination of the existing framework outlining how asset depreciation is deducted for tax purposes. The economist said while the specifics of this alteration remain to be seen, it had the potential to either increase or decrease tax burdens depending on the exact nature of the adjustments. “However, a well-crafted revision within this domain holds the possibility of encouraging greater investment in equipment upgrades, building expansions, and other infrastructure-related projects, ultimately resulting in a positive ripple effect throughout the economy,” said the economist.
Speaking on capital gains the economist underscored that going forward, the sale or transfer of business assets would fall under a newly enacted capital gains tax.
The economist added that for many businesses within Eswatini, this signified the introduction of an additional component to their tax calculations.
“If structured with carefully considered exemptions and limitations, this new tax could serve multiple purposes such as augmenting government revenue, ensuring a more holistic and equitable taxation of all forms of business profit, and potentially acting as a deterrent to certain forms of speculative investment behaviours,” said the economist.
The economist further said specific provisions had been added to the amendment with the express purpose of curtailing the ability of multinational corporations to artificially shift profits between jurisdictions utilizing intricate accounting strategies. “This crackdown aims to reduce tax avoidance schemes, ensuring a more level playing field and safeguarding Eswatini’s rightful share of tax revenue from the profits generated by large corporations operating within its borders,” said the economist.
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