Misanet / Mopheme, 4 June - In Lesotho, it is good bye to the 10% General Sales Tax and hello to the new 14 % Value Added Tax. Come 1 July, and Lesotho will experience the introduction of the Value Added Tax (VAT) following the passage by Parliament in September 2001 of the Value Added Tax (VAT) Act replacing the General Sales Tax (GST).

The introduction of VAT was delayed because of the need to establish good management and administrative structures, which were achieved through the establishment of the Lesotho Revenue Authority (LRA) headed by Kevin Donovan, a New Zealander, and a team of commissioners.

The Minister of Finance and Development Planning, Timothy Thahane told the business community recently that the government’s philosophy and approach to taxation "was grounded in a culture of sharing and solidarity with the poor and with those who are less able to support themselves."

- It is this philosophy that has inspired the introduction of free primary education, tax deductions for charities and exemptions for the basic necessities used by the poor, he said. "In due course it is my expectations that tax can be used to encourage donations to educational and other local charity institutions."

- It is the government's firm belief that its tax system must be progressive and exempt, as much as possible, the poor from the heavy incidence of tax, the Minister added.

The Minister expressed the government's view that the tax system must be fair and broad-based, adding that it must be paid by all eligible people.

- Tax compliance and not evasion must be considered a normal civic responsibility, stated Mr Thahane. "With regard to services, the government believes that the beneficiaries should pay for the service they receive while exemptions are made for the poor where appropriate and feasible."

He indicated that having a different rate for GST in Lesotho and VAT in neighbouring South Africa presented problems of fraud at the border posts where businesses and individuals claimed back the 14 percent VAT with one invoice and then presented a different invoice to the Lesotho authorities, thereby under-valuing the goods before paying the 10 percent sales tax.

- To overcome this problem, and to align our rates with Southern African Customs Union (SACU) members as is required under the agreements we have signed, the VAT rate will be 14 percent, the Minister added.

He disclosed that discussions were underway with the South African Revenue Service (SARS) to see if refunds of VAT could be made directly to the Lesotho Revenue Authority to obviate the need for payment when the same goods enter Lesotho to ensure that liquidity problems that Lesotho importers faced while waiting for their VAT refunds were eased.

By increasing the rate, Mr Thahane said there was need to protect those who would be disadvantaged by the 4 percent increase from the 10 percent on General Sales Tax, particularly the poor.

According to the Minister, "the following items will therefore enjoy 'zero VAT': agricultural inputs - fertilizers, seeds and pesticides, beans, bread, brown flour, lentils, livestock feed and poultry feed, maize grain, maize meal, milk, paraffin, peas and wheat grain. Currently, all these attract 10 percent sales tax."

- Therefore I will expect both wholesale andretail businesses to reduce the price of these commodities accordingly, he said.

Other commodity expected to be exempted is water, while electricity and telephone charges would remain at 5 percent, and non-professional sporting activities, cultural activities, charity arrangements and the sale and lease for residential property would also escape taxation.

As against the current minimum threshold of Maloti (= Rand) 250,000 for registering for GST, the minimum threshold has been raised Maloti 500,000 per year.

- This means that anyone with an annual turnover in excess of this figure MUST register, he said. "Those under this figure have an option. They can register and be able to claim input tax but to do this they must keep auditable records. Alternatively, they do not have to register, in which case they will buy their stock VAT paid and cannot claim it back."

Meanwhile, the Commissioner in the LRA, Nthako Sekome and his assistant, Thabo Moleko briefed the local media fraternity about the introduction of VAT and its implications at a meeting held at the Media Institute of Lesotho (MILES) on Friday, 30 May.

By Thabo Thakalekoala, Mopheme sub-editor

© Mopheme / afrol News

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