Africa-Press – Eswatini. Profit margins of Micro, Small and Medium Enterprises (SMEs) are expected to save more following government’s decision to finally introduce presumptive tax.
SMEs are the engine of the economy, as they have a propensity to employ more labour-intensive production processes than large enterprises. In essence, the role they play in stimulating economic growth is significant. In his budget speech in Parliament this past Friday, Minister of Finance Neal Rijkenberg announced that government was introducing presumptive tax for MSMEs to simplify their administrative processes and remove the requirement of audited financials for payment of tax.
Taxation
According to Investopedia, a reputable online search engine; presumptive taxation involves the use of indirect means to ascertain tax liability, which differ from the usual rules based on the taxpayer’s accounts. The term ‘presumptive’ is used to indicate that there is a legal presumption that the taxpayer’s income is no less than the amount resulting from application of the indirect method. This presumption may or may not be rebuttable. The concept covers a wide variety of alternative means of determining the tax base, ranging from methods of reconstructing income based on administrative practice, which can be rebutted by the taxpayer, to true minimum taxes with tax bases specified in legislation.
However, the major breakthrough that comes with presumptive tax is the issue of tax exemption for selected MSMEs. Those that generate annual turnover of less than E300 000 will be pleased to learn that they could soon be exempted from paying tax. If MSMEs earn between E300 000 and E1 million, they are likely to pay only 1.5 per cent of annual turnover.
Between E300 000 to E1 million, you qualify for presumptive tax, which means it is a turnover tax which is a certain percentage which is probably around 1.5 per cent. It does not even require an accountant. The minister of Finance had hinted about the tax relief in last year’s budget briefing.
Model
The presumptive tax model is incorporated in the proposed Income Tax Amendment Bill. Federation of Eswatini Business Community (FESBC) President Tum du Pont said his office was still doing a full analysis of the minister’s presentation. He had been sought to react on the new tax and the said benefits. Meanwhile, another development announced by the minister this past Friday regarding tax was the issue of company or corporate tax. It was reduced from 27.5 to 25 per cent. While the reduction in corporate tax is expected to attract both local and foreign investors, Southern African Research Foundation (SARFED) Regional Coordinator George Choongwa said the country might not experience much of the short-term benefit of this decision unless labour absorption strategy was used as an incentive to reduce unemployment. “The reduction of corporate tax is, however, expected to stimulate production and consumption in general,” said Choongwa.
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