Eswatini considers taxing digital services
September 27, 2023
The Ministry of Finance, supported by UNDP Eswatini and the South Centre Tax Initiative in Geneva, held a training on the taxation of the growing digital service industry in the country. The training, attended by officers from the Ministry of Finance, Eswatini Revenue Service, development partners and UN Agencies, was held at Sibane Sami Hotel, Ezulwini, from 25 to 27 September 2023.
Digital services have permeated most sectors of the economy, presenting multiple business opportunities for small and large entities in and outside the country. However, in an era where business transcends borders through the click of a button, traditional taxation models face an unprecedented challenge of losing the base from which to apply taxation. This is because digital services are provided through internet-based platforms allowing service providers to operate without being physically present in the country, thus circumventing the legislative basis for taxation of their profits.
Considering that the existing domestic tax legislation and treaties rely on taxation based on physical presence, the complexity of taxation has increased with the digitalisation of the economy resulting in revenue generated in one jurisdiction and profits taxed in another.
This new reality has triggered the need for a dialogue to help Eswatini adapt its tax systems to ensure that foreign digital business owners pay their fair share of taxes on revenue generated in the country, just like their local counterparts.
In this regard, the Ministry of Finance facilitated the workshop aimed at considering options to ensure that the unnoticed, yet growing digital economy is adequately taxed through the proper application of tax legislation. The stakeholders also discussed means of ensuring that local and international digital service providers comply with international commitments through the existing tax treaties and multilateral conventions.
UNDP, together with the South Centre Tax Initiative are the technical expertise in support of the process.
"The new reality brought about by the emerging digital economy brings forward a very critical question of how the country will adapt its tax system to ensure that foreign business owners pay for the publicly available social goods and services that are provided to their businesses just like any ordinary businessperson who is physically present in the country,” UNDP Eswatini Deputy Resident Representative Ms Nessie Golakai.
At the end of the workshop, the Ministry of Finance aims to develop a policy to guide the drafting of legislative changes in the current tax law to ensure that the digital service sector is properly taxed.
“The government is interested in looking at all the options on the taxation of the digital economy,” said Mr. Abner Dlamini, the Director of Fiscal and Monetary Policy at the Ministry of Finance.