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Govt slammed for budget estimates

The Minister of Finance Thabo Sophonea

April 9, 2021 2 min read

2 min read

THE Lesotho Chamber of Commerce and Industry (LCCI) has come out with guns blazing, slamming the government for budget estimates for the 2021/22 financial year.

The budget estimates were presented at the back of challenging economic conditions resulting from the ongoing COVID-19 pandemic, which led to collapse of some major economic sectors in the country.

LCCI has identified loopholes in the budget estimates, noting among others that while tax revenues have been declining in the past year, the budget speech did not indicate anything towards increasing taxes to cover the losses.  

There was no mention of possibilities of a tax credit for the coming financial year.

LCCI made reference to South Africa which has reduced tax rates for income tax.

As a major economic hub in the SACU region, some major economic decisions in South Africa have a direct impact on Lesotho, which is completely surrounded by South Africa. 

“It is worth noting that South Africa has actually reduced tax rates for income tax, also worth noting that South Africa intends to recover the tax losses through excessive increase on excise duties which have been increased by 8 percent, which is far way more than inflation. As part of SACU, Lesotho will have same increase on excisable products.

“This means that Lesotho will benefit from the increase in taxes in these products, which will impact VAT and Income tax as well as SACU revenues on excisable products that Lesotho produces (alcohol and tobacco),” LCCI said in letter demonstrating its input on the 2021/22 national budget.

The current proposed tobacco and alcohol levy, the LCCI revealed, will not assist government to increase revenue as it is not supported by any research or studies that could properly guide it.  

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The Ministry of Finance in collaboration with the Lesotho Revenue Authority (LRA) has since proposed the introduction of a 30 percent levy on tobacco and another 15 percent on alcohol.

“As it has been included in tax policy proposals, the government is advised to conduct consultations with the industries conducted and carry proper research that can clearly guide any policy proposals towards those products. These can also include research on cannabis industry as it is also a serious candidate for excise duty collection,” LCCI added.

The chamber has further identified that despite, prioritising agriculture in recent years, including the current financial year, it is hard to translate this prioritisation with actions on the ground to support.

This, according to LCCI is because there is no aligned tax policy on agriculture that supports the sector in a way that supports or encourages emerging farmers.    

“The current tax rates are inconsistent. There has to be a clear government policy that supports farm input including machinery,” LCCI showed.







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