Businessmen switch names to evade tax – ERS

EZULWINI – Some businessmen are allegedly changing the order or variation of their names to evade detection by tax authorities, according to the Eswatini Revenue Service (ERS).

ERS Director of Legal Operations Henry Sukati said the practice made it difficult for the revenue authority to accurately identify taxpayers and track their financial obligations.

Sukati said digital identification systems could help close this loophole by enabling authorities to establish that different names being used by an individual actually belonged to the same person.

“In Eswatini, we have a serious problem where we have someone, a businessman, calling himself Mohammed Ali. When he’s supposed to pay tax, he’s now Ali Mohammed,” Sukati said.

He said a digital identification system would allow the ERS to link the two identities and prevent individuals from using variations of their names to avoid tax obligations.

“If you can have digital IDs, you can actually pick that the Mohammed Ali of yesterday is still the Ali Mohammed today,” he said.

Sukati was speaking at the Southern Africa Organisation of Public Accounts Committees (SADCOPAC) Conference currently under way at Ezulwini.

He said the ERS was increasingly relying on technology, intelligence and information-sharing to identify undeclared income and pursue taxpayers who fail to meet their obligations.

He said the authority was also using information obtained from third parties, including commercial banks, investment houses and fintech companies, to track taxpayers with outstanding liabilities.

According to Sukati, some taxpayers claim they do not have money to settle their tax debts despite having funds held elsewhere.

He said the ERS could approach banks and investment houses to recover funds on behalf of taxpayers and reduce outstanding tax liabilities.

The revenue authority is also looking beyond Eswatini’s borders as it seeks to track financial flows through foreign banks and other jurisdictions.

Sukati said cooperation between revenue authorities was critical because taxpayers could move money across borders in an attempt to conceal their assets.

“If maybe you have money and you use a foreign bank for it, the intelligence will have the record of that and they will share it with a certain revenue service,” he said.

He said technology was also becoming increasingly important in addressing other tax compliance challenges, including non-registration, under-declaration and non-payment of taxes.

One of the measures being introduced is electronic invoicing, which Sukati said would improve the ERS’s ability to monitor commercial transactions.

Under the system, transactions conducted at businesses would be captured electronically, allowing the revenue authority to compare transaction records with taxpayers’ declarations.

He said this would assist the ERS in identifying instances where taxpayers under-declared their income.

“When you bring the returns at the end of the month, maybe if you forget some transactions, we’ll remind you because we have the records with us,” he said.

Sukati also raised concerns over the growing use of cryptocurrency and unregulated digital payment platforms, saying these could create additional avenues for tax evasion.

“Currently, in Eswatini, we do not have any legislation that embraces crypto,” he said, noting that people were already trading in cryptocurrencies despite the absence of a comprehensive legislative framework.

“We have to come up with legislation for such.”

He said the shift from cash to digital payments could strengthen tax administration if the platforms were properly regulated and provided revenue authorities with access to reliable third-party information.

However, he warned that moving transactions from cash into unregulated digital wallets could make it even more difficult to detect taxable activity.

“If we shift from cash to unregulated digital wallets, we worsen the situation as it is now,” he said.

Sukati said the ERS was therefore advocating stronger controls over digital financial platforms as part of efforts to bring more economic activity into the formal tax system.

He stressed that tax remained the most sustainable source of government revenue, ahead of borrowing and reliance on development partners.

Sukati said Eswatini’s tax-to-GDP ratio was currently around 15 per cent, which he described as positive, but said the country should work towards increasing it to about 20 per cent.

He said this would require improved taxpayer education, registration, filing and payment compliance.

Sukati said the ERS was combining education with enforcement, becoming softer in its engagement with taxpayers while remaining firm on compliance.

He said closing loopholes in the tax system, particularly those involving digital finance and taxpayer identification, would require cooperation among revenue authorities, financial institutions, regulators and governments across the region.

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