An analysis of tax potential in Swaziland (1980-1994).

The major objective of this study has been to analyze in depth potentiality of tax system of the Swazi economy using revenue productivity measures method. Having examined the budgetary trends in Swaziland during the period of the study, one major problem that emanated is that the estimated government recurrent revenue fell short of her anticipated recurrent expenditure. Means and efforts have been undertaken in an attempt to bridge the gap but to no avail. Literature on public finance appears to suggest that frequent changes in tax structure as means of raising more revenue associated with economic bottlenecks. Therefore, one may think that adequate information regarding the responsiveness of taxes with respect to their bases, bases with respect to national income, and government effort is very crucial. An Ordinary Least Squares (OLS) technique has been used in estimation of various elasticities and buoyancies of the whole tax system. Major findings of the study verified the hypotheses formulated. Indeed, the elasticity of the tax system in Swaziland is less than unity. The findings further revealed that different forms of taxes respond differently to income changes as well as taxes to their bases and bases to national income. An analysis of government efforts in tax collection appeared somehow negative on to tax collection and positive efforts on other tax collections and customs union receipts The major reason of the inelastic nature of taxes in the country lies in the nature of the economy and its relationship to neighboring economies. It became evident that the present budgetary trend has to be reformed and be made more realistic by taking into account what is happening in the neighbouring countries. Above all, it must be designed to provide for accountability to the legislature for the sake of financial control and management of government operations. The tax system should be designed in such a way that granting of tax exemptions is minimized or eradicated since this erodes tax bases. Moreover, the tax system must avoid frequent undertaking of discretionary changes, rather be conducive for automatic response to take its course. Therefore elastic taxes should be implemented rather than inelastic ones.