… Long-overdue correction raises tougher question: Who will compensate businesses crippled by years of unlawful penalties? E200 penalty cut to E50
…Attention shifts to ERS and Government over whether affected taxpayers will receive relief for historical penalties
… MPs admit E200 daily tax penalty destroyed businesses instead of promoting tax compliance
… Companies demand justice as Parliament fixes a law that left many drowning in crippling penalties
BY MFANUFIKILE KHATHWANE
LOBAMBA – After years of complaints from struggling businesses, emotional pleas from taxpayers and countless companies watching their tax debts spiral beyond recognition, Parliament has finally stepped in to slash the controversial daily tax penalty from E200 to E50.
For many businesses, however, the decision has come far too late.
The amendment, approved by Parliament on Wednesday, has been celebrated as a victory for taxpayers after Members of Parliament openly acknowledged that the previous penalty regime had become excessively punitive and was destroying businesses rather than encouraging compliance.
But beneath the celebrations lies a far bigger question that Parliament appears to have left unanswered.
What happens to the thousands of companies and individuals who were subjected to the E200 daily penalty?
That is the uncomfortable question hanging over Parliament’s decision.
If lawmakers now accept that the penalty was excessive and required urgent correction, was it ever fair for taxpayers to have been subjected to it in the first place?
More importantly, should businesses that suffered under the old regime simply be expected to move on while others immediately benefit from the new law?
These questions deserve answers because this is not merely about reducing a penalty. It is about justice.
Members of Parliament revealed cases where relatively small tax obligations snowballed into enormous debts because penalties accumulated every day without any meaningful limit. Examples cited during debate included taxpayers whose liabilities allegedly exceeded E263000, with penalties alone exceeding E120000, while other businesses reportedly saw debts grow from only E500 to nearly E2 million after penalties and interest accumulated.
Those figures represent companies, jobs, employees and families. Many businesses reportedly closed while others exhausted their savings trying to settle debts that kept increasing daily.
Parliament deserves recognition for finally listening to taxpayers. MPs argued that penalties should correct taxpayers rather than destroy businesses and some proposed introducing a statutory cap to prevent penalties from accumulating indefinitely.
However, reducing the penalty prospectively leaves an unresolved issue. Businesses that were already charged under the previous regime may reasonably ask whether historical cases should now be reviewed.
The Finance Committee itself acknowledged inconsistencies requiring correction before the Bill proceeded, reinforcing the importance of ensuring that tax legislation is clear, proportionate and consistent.
Justice should not depend entirely on timing. If Parliament now accepts that E200 per day was excessive, many taxpayers will question why those already affected should simply absorb the losses.
Tax policy should encourage compliance while supporting economic growth. When penalties become several times larger than the original tax owed, public confidence in the tax system inevitably suffers.
ERS has existing mechanisms allowing applications for penalty waivers and negotiated payment arrangements. While these have assisted some taxpayers, they do not automatically address the broader concerns raised by businesses that accumulated substantial historical penalties.
Parliament’s decision to reduce the penalty is an important step toward a fairer tax administration system. Nevertheless, the national conversation should not end there.
Lawmakers should consider whether previously accumulated penalties deserve review, whether penalty ceilings should be introduced, and whether businesses that suffered under the previous framework require transitional relief.
Strong institutions are measured not by whether mistakes occur but by their willingness to correct them. Parliament has taken an important first step. The remaining challenge is ensuring that fairness extends not only to future taxpayers but also to those who carried the burden of the previous regime.
Until those questions are addressed, many businesses will continue to regard the amendment as an important correction—but not yet a complete resolutio
