South Centre

Eswatini tax officials report significant capacity enhancement after digital taxation workshop organised jointly by the South Centre and the UNDP

Kuldeep Sharma
Research Consultant – Tax with the South Centre Tax Initiative

The South Centre and the United Nations Development Programme (UNDP), through its Tax for SDGs Initiative, jointly organised a three-day capacity-building workshop on 25-27 September ’23, in Eswatini on Digital Taxation for twenty government officials from the Eswatini Revenue Service, Ministry of Finance and Attorney-General’s Chamber.

The South Centre Tax Initiative in collaboration with the UNDP Tax for SDGs Initiative aim to support developing countries in increasing Domestic Resource Mobilization (DRM) and achieving the Sustainable Development Goals (SDGs). The technical sessions in the workshop were taken up by Dr. Laila Latif, Technical Specialist – Tax4SDGs, UNDP and Mr. Kuldeep Sharma, Research Consultant – Tax, South Centre Tax Initiative.

The purpose of the workshop was to disseminate awareness on all technical aspects of the extant rules on digital taxation and various policy options available, following which, discussions that inter alia included presentations rendered by the technical experts, were made on the following lines:

  • Discuss various domestic and tax treaty approaches for taxing digital services, including unilateral, bilateral, and multilateral options.
  • Cover the Organisation for Economic Co-operation and Development (OECD)’s Pillar One and Pillar Two solutions, including the Global Minimum Tax and Subject To Tax Rules (STTR).
  • Assist Eswatini in making informed decisions regarding assessing the feasibility of taxing digital services, sharing country perspective on taxing digital services, and understanding the application of the Two Pillar solution and Article 12B of the United Nations (UN) Model Double Taxation Convention (DTC) 2021 for taxing Income from Automated Digital Services.
  • Build capacity on methodologies for revenue impact analysis to support evidence-based tax policy decisions.
  • The overall goal was to equip stakeholders to evaluate different tax policy options, including tax incentives and implications for domestic resource mobilization, and achieving SDGs in Eswatini.

During the workshop, the technical experts from the UNDP and the South Centre helped participants gain an understanding of the various unilateral measures available to tax the digital economy, including Digital Services Taxes (DSTs) / Equalisation Levy (EL) and Significant Economic Presence (SEP) rules. Participants were made aware of the computation of Amount A under Pillar One and the way it compared with Article 12B of the UN Model DTC 2021. Participants also gained an understanding of the key features under Pillar Two on the application of global minimum tax and various approaches that developing countries may adopt to prevent ceding of tax to ultimate parent Multinational Enterprises (MNEs)’ jurisdiction. The economic realities under the OECD Pillar 1 and 2 approach, unilateral domestic measures and UN Article 12B provisions were discussed. In addition, participants were made aware of the importance of taxation of computer software under Article 12 (Royalties) of the UN Model DTC, and the comparative features of the UN STTR and OECD STTR.

The format of the workshop was designed to be interactive and consisted of lectures/presentations followed by Q&A sessions and ‘breakout groups’ discussions where the policy options were applied to case studies. The participants actively engaged in all the sessions and through inter-se discussions, they were able to better understand all the nuances and practical aspects of digital taxation rules.

The positive impact made by the workshop was immediately evident from pre-workshop and post-workshop feedback provided by the participants, as summarised hereunder:

Thus, from the above data it is clear that the workshop had a substantial impact in enhancing the capacity of the officials and succeeded in its overall objectives.

The workshop concluded with appreciation for the South Centre and UNDP’s support. As could be seen from the evaluation data, the workshop succeeded in its objectives of enhancing the capacity of government officials in the international tax aspects relevant to digital taxation. At the end of the workshop, the Ministry of Finance(1)  official stated that the government aims to develop a policy to ensure that the digital service sector is properly taxed and that the government is interested in looking at all the options on taxation of the digital economy.

Through similar workshops, the South Centre will continue to support developing countries mobilize tax revenues to achieve the SDGs.

Endnote:

(1) https://www.undp.org/eswatini/press-releases/eswatini-considers-taxing-digital-services

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